Prosal

A PROPOSAL OF
CREDIT RISK MANAGEMENT WITH THE REFERENCE TO THE SHINE

RESUNGA DEVELOPMENT BANK LIMITED
Submitted by
Name
T.U. Registration No: ------
Symbol No: ------
Resunga Multiple Campus, Resunga Municipality,Gulmi
Submitted To
The Faculty Of Management
Tribhuvan University
In Partial Fulfillment of The Requirement For The Degree Of

Bachelor of Business Studies (BBS)
Tamghas,Gulmi
April ,2018
1.1 Background of the Study
Financial institutions primary objective is borrowing and lending the fund. They
purchase bond from the general public and invest those fund in multiple assists.
The difference amount between the borrowing and selling of the fund is the profit
for the financial institutions. For generating that profit financial institutions are
exposed to confront with many risks they are credit risk, liquidity risk, exchange
risk etc. Among them credit risk is typical risk which has impact on profit of the
financial institutions severely.
Credit is that kind of risk in which the borrowers of financial institutions fails to
pay interest and principal at the stipulated time period. Some of the credit risk is
firm specific credit risk whereas some credit risk is systematic credit risk. Firm
specific credit risk is that credit risk in which a single firm or few of the firm fails
to pay their contractual obligation. Conversely the systematic credit risk implies
that the entire firms are unable to maintain their obligation. The reason for not
maintaining its obligations because of the overall macro economic variables such
as inflation, fiscal policy, monetary policy, civil war etc are the responsible
factors. Financial institutions can control firm specific credit risk by regular
monitoring but firm's efforts cannot address the systematic credit risk.
In case of Nepalese commercial banks, development banks are exposed to this
credit risk extremely. Shine Resunga Development Bank is one of the commercial
bank which also not exception.
1.2 Statement of the problem:
This study attempts to identify the credit risk to the Shine Resunga Development
Bank and their efforts or ways to minimize the risk. In this competitive financial
market earning profit is itself a tough task. Therefore minimizing the risk is the key
strategy to boost up its performance. This research will try to find out some of the
following facts.
 To which extent financial institutions can manage credit risk?

 What measures are effective for minimizing credit risk?
1.3. Objectives of the study:

The basic objectives of this study is to know how credit risk impact on the equity
position of the shareholders. The specific objectives of this research are furnished
with the following points.
 To know the impact of credit risk as the risk in individual credit or
transactions.
 To assess categories how many borrowers are the prime clients or the low
grading clients?
1.4. Significance of the study:
Some of the following points are the importance of the study:
 It helps to know the past and present condition of the bank.
 It helps to know the credit risk management of the bank.
1.5 Literature Review:
In course of studying previous studies to know the research gap or to identify the
uncovered facts some of the major sources of this study will be the website of
concern banks, different articles associated with the subject matter etc.
Credit is the amount of money lent by creditors to borrower either on the basis of
security or without security. Credit and advances is an important item on the assets
side of the balance sheet of a commercial bank. Bank earns interest on credits and
advances which is one of the major sources of income of banks. Bank prepares
credit portfolio; otherwise it will not only effect profitability adversely.
(Varshney.N.P and Swaroop,1994:6)
-Overdraft
-Cash credit
-direct credit
-discounting of bills
For bank overall corporate strategy and strategic plan at least three critical
components are needed. They are
-Business plan
-Framework for risk management
-strategy for corporate control
These are the basic components provide a solid foundation for managing value and
risk planning; it focuses in just an operating and competing in the financial services
industry. The modern strategic approach also includes a framework for risk
management and strategic for completing in the components fits for modern idea
of the basic business of banking as measuring, managing and accepting risk by
maximizing those or eliminating those that destroy value. The main task of
commercial bank is to collect funds as deposit through several sources and lend
them to different sectors like manufacturing, transportation, trade construction,
communication and other public utilities etc. Doing all these activities every bank
has to face so many risks. There are several risk prevailed in the banking industry,
but the major area of the risk are widely recognized, i.e credit risk, market risk, and
operating risk etc.
1.6. Research Methodology:
1.6.1 Types of Research:
This research will be more or less applied basis that means this research cannot be
applicable for other nature of organization.
1.6.2. Population and sample:
In this research population of the 28 commercial banks and 65 development banks
among these two commercial banks are chosen for the study by using the one of
the probability sampling method i.e stratified sampling method. If the population is
heterogeneous we tend to use the stratified sampling method.
1.6.3 Types of Data:
There are two types of data which are useful for research i.e primary and secondary
data. Secondary data are preferable for this research. Library books, websites of
concerned banks will be major sources.
1.6.4 Data collection procedure:
Secondary sources of data will be used for research. The data generated by others
are secondary sources of data. Books available in library websites of concerned
banks, journals, etc will be used.
16.5 Instruments:
For presenting the collected data different statistical instrument will be used to
make the data easily under stand able. They are bar- diagram, Pie-chart etc.
1.6.6 Techniques of Data Analysis:
The collected data will be analyzed on the basis of balance
sheet and income statement of concerned banks before default transactions include
and including their impact on balance sheet on the equity position of the
shareholders . In order to find out required result different techniques of data
analysis will be used i.e pie- chart, bar-diagram.
1.6 ORGANIZATION OF THE STUDY:
This study can be organized into five different chapters.
Chapter one introduce the major issues, objectives, significance and limitations
of study.
Chapter two is devoted to the theoretical analysis and brief review related to the
literature available. It includes a discussion of the conceptual framework and
review of the studies.
Chapter three describes the research methodology employed in the study. It

consists of research design, sources of the data, population and sampling,
statistical and financial tools used to analyze the data.
Chapter four data has presented and analyzed accordance with the research
methodology.
Chapter five presents the major findings and provides some suggestions. The
bibliography and appendixes have been incorporated at the end of the study.
REFERENCES
Dr. Yadav Raj Koirala , Rajeshwar,pd. Acharya , Shree Ratna Shakya ,Ram Lal
Joshi ,Bhanu Bhakta Sharma(2016). Advanced Financial accounting, Asmita books
publishers and Distributors Private Limited.
Dev Raj Adhikari , Ph.D. ,Dhurba Lal Pandey , Ph. D (2016) Business Research
Methods, Asmita Books Publishers and Distributors (P) Ltd, Kathmandu, Nepal
Dr. Yadav Raj Koirala, Sushil Dahal,(2016) Accounting For Business, Asmita
Books Publishers and Distributors (P)Ltd, Kathmandu, Nepal
Website of Shine Resunga Development Bank and Global IME Bank

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A PROPOSAL OF

CREDIT RISK MANAGEMENT WITH THE REFERENCE TO THE SHINE

In Partial Fulfillment of The Requirement For The Degree Of

 To which extent financial institutions can manage credit risk?

1.3. Objectives of the study:

This study can be organized into five different chapters.

Chapter three describes the research methodology employed in the study. It

Website of Shine Resunga Development Bank and Global IME Bank

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