Note that these net profits were claculated with the number of increase or decrease in the overall loans investments in these bank groups.
An important thing to note here is that while bank credit is increasing in India, the overall impact that its has on the GDP and the economy is still not at the extent that some of the other countries experience. India's current bank credit holds to 80% of the GDP of the country, in fact the entire Asian block with Thailand and China does not record higher than 100% of the GDP. When comparing that to Hong Kong (with 180% of the GDP and rising), it becomes obvious that the bank creidt management needs to revised for superior perfrmance.
Risk Management for Indian Banks
"Risk management is relatively new and emerging practice as far as Indian banks are concerned and has been proved that it's a mirror of efficient corporate governance of a financial institution. Globalization and significant competition between foreign and domestic banks, survival and optimizing returns are very crucial for banks and financial institutions. However, selecting the efficient customer and providing innovative and value added financial products and services are another paramount factors. In a volatile and dynamic market place for achieving sustainable business growth and shareholder's value, it is essential to develop a link between risks and rewards of all products and services of the bank. Hence, the banks should have efficient risk management framework to mitigate all internal and external risks" (Nallamothu & Ahmed, 2010).
In order to better manage bank credit risk, it is important to understand the various ways and situations in which credit risk can emerge. Some of the more common aspects or situations that occur in the form of credit risk include the following (Cool Avenues Knowledge Management Team, 2010):
If the transaction was designed in a direct lending format, then there is a higher chance that the funds originally transferred would not be returned or repaid; this could lead to losses of credit investments
If and when the liabilities of the clients or customers are crystallized, especially in the instances of the liabilities in question being guarantees or letters of credit, the customer or client will not be willing to come forward and pay back the funds received; this could lead to losses of credit investments
When talking about the financial freezes in the treasury products, there is an expectation of a cease of repayments or the parties involved not being willing to pay back the funds based on the original terms of agreement or contracts; this could lead to losses of credit investments
Contracts will also face minimal changes if and when security industry exchange business dealings with other industries they are already in business with; this could end up being a loss in investments as there will be minimal to no addition in credits taken for the new contracts
If and when there is an international dealing made, apart from internet banking, with maximum focus being on the cross-border exposure, this situation can result in the restriction, termination and deficiency of currency transfers between the two countries involved; this again causes numerous credit and accounting issues for both parties involved but particularly for the banks that lend or loan the money;
The fact of the matter is that with the banks improving and escalating their transactions and markets to a global scale means that they have to actually implement a far diverse internal structure. This in turn means that they will need to employ far more efficient and intricate strategies to counter the various formats of unprecedented credit risks that they might face. Aside from the credit risks involved in global banking, there are quite a few other hurdles and risks that banks will have to prepare for, for instance the operational risks that come with being a commercial-based operative; the business risks faced by the commercial borrowers, the various topographical/political/cultural/religious/legislative risks associated with expanding into an unknown or foreign territory; even the reputation risks involved can turn out to be make or break for bank groups or companies involved in global banking. However, all of these can be preemptively countered by conducting thorough market researches before establishing global business settlements; credit risk management, however, is not that easy to prepare for (Cool Avenues Knowledge Management Team, 2010).
"Credit risk management enables banks to identify, assess, manage proactively, and optimize their credit risk at an individual level or at an entity level or at the level of a country. Given the fast changing, dynamic world scenario experiencing the pressures of globalization,...
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