Risk Management in Banking & Establishing Credit Risk Grading Model

All Banks are burdened with non performing (NPL) loans, which causes to reduce profit. Banks are continuously trying to minimize risk so that it makes less mistake to select right borrower who has adequate experience in business, good repayment behavior and can make value addition so that it pay back bank¿s dues in time. In Bangladesh all Banks, credit is run under Bangladesh Bank¿s (BB) credit guidelines of classification. Classification has set rules under BB established in line with international standard. The details of classification are discussed in this report separately to have an idea about it. The objective of the study is to formulate a more comprehensive credit grading methodology (CRG) by using different ratio, besides the ratios are practiced under existing CRG. The proposed Model can provide many correlations among the Balance sheet, which will help Bankers to find out risk element and way out to minimize risk while taking decision for a loan approval process. The details of ratios are discussed elaborately in the report separately.