Icici

CHAPTER 4

DATA ANALYSIS & INTERPRTATION

RISK MANAGEMENT IN BANKS.

The banks face high risk in the conduct of its activities due to the financial nature of its transactions and its uncertain financial outcomes. So steps need to be taken to minimize these risks.

The main objective of this study is to identify, and manage uncertainty in the conduct of various activities and transactions in the bank. This is a descriptive study and the data is collected from primary and secondary sources.

The urban co-operative banks are performing same banking functions as commercial banks and are exposed to similar risks in the operations, non applications of capital adequacy norms to urban co-operative banks undermines the stability of the whole banking system. It has therefore been found necessary to extend capital adequacy norms. ie; Capital to Risk Assets Ratio (CRAR) to urban co-operative banks in a phased manner commencing from 31st march 2002. Accordingly, urban co-operative banks are required to adhere to capital adequacy norms in a phased manner.

Risk matrix of a bank – An outline.

CREDIT RISK MANAGEMENT.

In the global scenario, the increased credit risk arises due to two reasons. Banks have been forced to lend to riskier clients because well rated corporates have moved away from banks as they have access to low cost funds through disintermediation. The other reason is the lurking fear of global recession. Recession in the economy could lead to low industrial output which may lead to defaults by the industry under recession culminating into credit risk. Hence, the markets are in search of new credit risk management models.

When the banks give the signals of distress, the depositors panic and run for their money. As per the existing rules, Deposit Insurance and Credit Guarantee Corporation of India (DICGC) guarantees the depositors' money up to one lakh rupees subject to certain conditions. Till now, the banks used to pay...