Introduction:

Credit risk is the risk of loss from exposure to firms that undergo credit events. This
might be that the obligor defaults, but in some cases it is that adverse changes in credit quality
can lead to losses. There are a great many events that can have a credit impact, which
complicates the definition, analysis and management of the process. Credit risk can be seen as an
informational problem. The credit giver does not know enough about the quality of the credit
taker and how the obligors will per-form in the future. As a task, credit risk management
involves identifying the source of risk, selecting the appropriate evaluation method or methods
and managing the process. This will mean setting an appropriate cut-off point that balances the
conflicting demands of the organization with regard to credit exposure. Credit risk management
can be seen as a decision problem. The assessment involves determining the benefit of risk
taking versus the potential loss. Decisions about extending credit are complex and subject to
change, but at the same time are critical elements of risk control within most organizations.
The credit risk management and risk based on the supervision in banks have been the
study Subject many agencies and researches and academicians there is a treasure of literature
available on subject. A careful selection relevant material was formidable task
before the researchers efforts have been made to scan the literature highly
reverent to the context. The main sources of literature have been the
website of the Reserve Bank of India the website of the based committee on
banking supervision and website of survival of major banks both in India and
abroad. The publication academicians engaged in Credit risk management
and Central banking supervision sphere also throw valuable insights into the
area the association the reasech papers published Reserve Banks speeches
of the governor and deputy governors of the Reserve Bank of India the
publication of the Reserve Bank of India the Indian banks association have
provide quite to the relevant study.
Credit risk refers to the risk that a borrower will default on any type of debt by failing to make
required payments The risk is primarily that of the lender and includes lost principal and interest,

disruption to cash flows, and increased collection costs. The loss may be complete or partial and
can arise in a number of circumstances For example:

A consumer may fail to make a payment due on a mortgage loan, credit card, line of
credit, or other loan

A company is unable to repay asset-secured fixed or floating charge debt

A business or consumer does not pay a trade invoice when due

A business does not pay an employee's earned wages when due

A business or government bond issuer does not make a payment on a coupon or principal
payment when due

An insolvent insurance company does not pay a policy obligation

An insolvent bank won't return funds to a depositor

A government grants bankruptcy protection to an insolvent consumer or business

To reduce the lender's credit risk, the lender may perform a credit check on the prospective
borrower, may require the borrower to take out appropriate insurance, such as mortgage
insurance or seek security or guarantees of third parties. In general, the higher the risk, the higher
will be the interest rate that the debtor will be asked to pay on the debt.
The roots of the State Bank of India lie in the first decade of the 19th century, when the Bank of
Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal
was one of three Presidency banks, the other two being the Bank of Bombay (incorporated on 15
April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks
were incorporated as joint stock companies and were the result of royal charters. These three
banks received the exclusive right to issue paper currency till 1861 when, with the Paper
Currency Act, the right was taken over by the Government of India. The Presidency banks

amalgamated on 27 January 1921, and the re-organized banking entity took as its name Imperial
Bank of India. The Imperial Bank of India remained a joint stock company but without
Government participation.

Literature Review:
Credit Risk and management Quite often credit risk management (CRM) is confused with
managing non-performing assets . However there is an appreciable difference between the two
are a result of past action whose effects are realized in the present i.e. they represent credit
risk that has already materialized and default has already taken place. On the other hand
managing credit risk is a much more forward-looking approach and is mainly concerned
with managing the quality of credit portfolio before default takes place. In other words, an
attempt is made to avoid possible default by properly managing credit risk. Considering the
current global recession and unreliable information in financial statements, there is high
credit risk in the banking and lending business. To create a defense against such
uncertainty, bankers are expected to develop an effective internal credit risk models for the
purpose of credit risk management

Hanna and Han week: [2009]Felt that the insolvency for bank become true when currently
losses exhnest capital completely it also occurs when the return on assets (ROA) is less then the
negative capital assets ratio. The probability of insolvency explained in terms of an equation the
help Statistics is commonly employed by academicians in computing probability.

Patrick Hoonah:[2010] Explain the use of budgetary funds to help restructure a large failed
banking system and the various consequence associated with it the article discuss how
instruments can best be design to restore bank capital liquidity and incentives it considered how
recapitalization can be modeled to ensure right incentives for new operators or managers to
operate in a prudent manner ensuring good subsequent performance it discuss how governments
budget and interest of the task payer can be procted and suggest that monitory policy should
respond to the recapitalization rather determine its design.

Carl Felsenfled:[2011] Outlined the patterns of international banking regulation and

resources of governing law. He reviewed present practices and evolving changes in the field of
control systems and regulatory environment. The book dealt a wide area of regulatory aspects of
banking in the United States regulation of international banking. International banking services
and international monitory exchange the work attempted in depth analysis of all aspects of bank
regulation and supervision.

Bessone, Biagio (2011) feels that Banks are special as they not only accept and deploy large
amounts of uncollateralised public funds in a fiduciary capacity, but also leverage such funds
through credit creation. Thus Banks have a fiduciary responsibility. Banks play a crucial role in
deploying funds mobilized through deposits for financing economic activity and providing the
lifeline for the payments system
S.K.Bagchi (2009) observed that in the world of finance more specifically in Banking, Credit
Risk is the most predominant risk in Banking and occupies roughly 90-95 per cent of risk
segment. The remaining fraction is on account of Market Risk, Operations Risk etc. He feels so
much of concern on operational risk is misplaced. As per him, it may be just one to two per cent
of Banks risk. For this small fraction, instituting an elaborate mechanism may be unwarranted. A
well laid out Risk Management System should give its best attention to Credit Risk and Market
Risk. In instituting the Risk Management apparatus, Banks seem to be giving equal priority to
these three Risks viz., Credit Risk, Operational Risk and Market Risk. This may prove counterproductive.

Statement of the Problem:

To study credit management process and to manage the credit risks of the bank in order to
reduce the growing default risk problem and to develop the rating model for banking sectors.
Hence this project is an attempt which considers the factors while lending loan to
banking sectors, and rating those parameters to manage the credit risk.

Objectives of the Study:

The following are the major Objectives of the Study:
1. To examine credit approval process in State Bank of India.
2. To study the branch managers awareness towards credit risk management system in
State Bank of India.
3. To study the risk control strategies followed by the managers.
4. To gain insights into the credit risk management activities of the bank.
5. To suggest appropriate measures to SBI.

Sources of Data Collection:

Secondary Data:
The methodology way to solve research problem systematically the project study is purely based
on data gathered from secondary sources the required the secondary is the main sources of
information give for a purpose of present study The sources of secondary data were from various
publicities annual reports and journal articles and RBI bulletins, SBI monthly magazines, various
research articles etc,. Tools are used line charts column graphs

Expected Results

SBI is sanctioning less Credit to agriculture, as compared with other Banks.

SBI Compare to other Banks SBIs recovery policy is may good, hence this reduces NPA.
As compared total advances of SBI is may increase year by year.
State Bank Of India is granting credit in all sectors in an Equated Monthly Installments
so that anybody can borrow money easily

Bibliography
Books:

Credit Risk Assessment (CRA) system. State Bank of India 2012. Khan, M Y. "Financial
Services" 4/e. New Delhi: Tata McGraw-Hill, 2013. Vaidhyanathan, T.S. "Credit Management".
Reports:
IBEF. "Industry update: Banking." IBEF website .March 9, 2012. http://www.ibef.org (accessed
March 9, 2012). Rana, Babita. "Modest growth expected in net profit of banking industry in
March 2012 quarter."CMIE, March 2012. V, Leeladhar. "Basel II and credit risk management."
BIS website Sept 15, 2011.
httpwww.bis.orgreviewr071002e.pdf (accessed March 3, 2011).
Websites:
http://www.google .com .in/
http://www.wikipedia.com/ (accessed Jan 9, 2011).
http://www.rbi.gov.in/ (accessed Jan 25, 2011).
http://www.bankersindia.com/ (accessed Feb 2, 2011).