Case Study..

The Impact of Size on Credit Risk Management Strategies in Commercial Banks: Empirical Evidence from India

IDENTIFICATION OF PROBLEM

OBJECTIVES
1. TO EXPLORE THE RANGE OF BENCHMARK CRM STRATEGIES AND EXAMINE THE EXTENT TO WHICH THESE PRACTICES ARE FOLLOWED BY THE BANKS OF VARYING SIZE. 2. TO PERFORM A CROSS COMPARISON OF SPECIFIC CRM STRATEGIES FOLLOWED BY BANK OF VARYING SIZE. 3. TO DETERMINE WHETHER THE SIZE OF THE BANK IS HELPFUL IN EXPLAINING THE VARIATION BETWEEN BANKS FOLLOWING DIFFERENT CRM STRATEGIES.

Literature Review
Empirical study on CRM practices followed by banks in various countries Indian authors like Sathye(2005), Chaudhari and Sensarma(2008) have focused on issues: Relating to default probability Non-performing advances Impact of privatization on management Risk management policies

 Mehra(2010) examined the impact of ownership & size on a range of operational risk management practices in Indian banks The study concluded that large-sized banks have a well developed framework for operational risk management as compared to their peers Their findings reveal that large banks & profitable banks have better risk management procedures and technology

Collection of Information/Data
To examine the impact of bank size on CRM strategies a total of 35 responding commercial banks were classified into 3 categories on the basis of value of total advances made by these banks at the end of year 2006-07 12 banks with advances more than 40,000 Cr. As large banks 16 banks having advances in the range of 10,000 to 40,000 Cr. As medium sized banks

 The remaining 7 banks having advances less than 10,000 Cr. As small sized banks For the study, primary data regarding CRM strategies of 35 Indian scheduled commercial banks were collected through a structured Questionnaire classified into 3 heads namely: CRM organization CRM policy CRM operations and systems

Analysis and Interpretation of Data

Both descriptive and statistical techniques are used for the analysis of the data Association between the size of bank and CRM strategy is tested by chi-square test The study of association between the size of bank and CRM strategies are done with regards toCRM Organization CRM Policy CRM Operations and systems at transaction level and portfolio level

CRM Organizationo Many banks had segregated CRM and credit administration o Formation of CPPC is not statistically significant o Super-Specialized groups such as CDMC and CRIG were constituted by large sized banks o Loan Review Mechanism- only medium sized and large sized banks followed the strategy of forming CRMD and CARD CRM Policyo Framing CRM policy in large sized banks were generally authorized with Board of Directors and RMD o Detection of the Credit limit was done by medium sized banks constituting 75%

CRM Operations and systems at transaction levelo Large Banks used multiple basis of classification of exposure for employing credit risk rating model o Revision in credit risk rating model was commonly followed by all sample banks o Review was done on yearly basis by small sized banks and less than yearly basis by medium sized banks At portfolio levelo Credit portfolio risk model were used by small banks(72%) o Medium sized banks were lagging behind small and large sized banks in estimating credit risk at portfolio level o Stress testing of credit portfolio was not significantly associated with the size of the bank

Suggestion..

Conclusion

Thank you..