Impact of credit risk management on profitability in banking Industry of Pakistan

Abstract

If the borrower in unable to pay the debt according to the agreed terms and conditions this is called credit risk and credit risk management is the process of manageingFrom previous thirty years the banking sector were facing financial crisis, these crisis effected the performance of banks. The research conducted by Demirguc-Kunt & Detragiache, (1998) in their study they indicated that from earlier 1980s total 30 major financial crisis have been faced by the financial institutions and usually many were found in developing countries. There were numerous reasons behind the occurrence of such crisis like mismanagement of activities which cause increase in credit similarly due to constant increase in asset prices created bubble in the long run as a result the bubble burst which cause fall in the prices of assets and also increase non-performing loans, credit losses and acute banking crises were the main reason of losses in the banks which leads to bankruptcy.