Impact of Credit Risk Management on Bank’s Performance: Empirical Study on Commercial Banks of Pakistan

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Published Jun 1, 2024
https://doi.org/10.61506/02.00216
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Vol. 10 No. 2 (2024): Journal of Policy Research

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Syed Wajahat Ali
MS Scholar, Southern Business School, ISP Multan
Abdul Rauf Kashif
Assistant Professor, Southern Business School, ISP Multan
Muhammad Hammad
Lecturer, Southern Business School, ISP Multan
Sajjad Ahmad
Scholar, Southern Business School, ISP Multan
Ahmad Raza
MS Scholar, Iqra University Islamabad

Abstract

This practical study examines the relationship of "Credit Risk Management, over performance of commercial banks in Pakistan. Utilizing credit risk management-CRM indicators such as Non-Performing Loan (NPL), Advance to Deposit Ratio (ADR), and Capital Adequacy Ratio (CAR), our study spans 15 years of financial data from 21 out of 33 commercial banks. Employing panel data analyses, including Descriptive statistics, Unit Root Test, Panel Least Square Model and Hausman test.  The study reveals noteworthy insights, Firstly, an increase in NPL negatively impacts bank profitability, advising systematic customer information collection and widespread analysis for lending decisions. Secondly, a negative relationship between CAR and bank performance emphasizes complicated balance between regulatory compliance and operational efficiency. Notably, ADR did not significantly impact performance, suggesting the need for further exploration. These findings contribute to bridging existing research gaps and offer practical insights for lending department and regulatory authorities in shaping the financial landscape of Pakistan's banking industry.

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Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite
[1]
Ali, S.W. , Kashif, A.R. , Hammad, M. , Ahmad, S. and Raza, A. 2024. Impact of Credit Risk Management on Bank’s Performance: Empirical Study on Commercial Banks of Pakistan. Journal of Policy Research. 10, 2 (Jun. 2024), 144–152. DOI:https://doi.org/10.61506/02.00216.
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