Impact of Credit Risk Management Practices on the Profitability, A Case of Askari Bank Limited

Abstract

The paper is a study to check credit risk management efficiency of Askari Bank Limited (ABL), and to conclude how Credit Risk Management CRM practices are impacting to increase profitability of commercial banks. Credit risk management (CRM) is a separate department that needs procedures for monitoring and control of the credit risk exposures. For conducting this research, secondary data is collected from annual report of Askari Bank Ltd. The study discusses CRM in general and then it’s implication in context of Askari Bank. The impact of CRM on banks profitability is analysed using regression analysis in which Return on Assets (ROA) was dependent variable and Non-Performing Loan Ratio (NPLR), Loan Loss Provision ratio (LLPR) and Capital Adequacy Ratio (CAR) were independent. The findings show that NPLR has negative impact whereas CAR and LLPR has positive impact on the ROA.

Keywords: ABL, CRM Practice, ROA, NPLR, LLPR, CAR.