Risk management practices in the banking industry focus on managing an institution's exposure to losses or risk and to protect the value of its assets. On the other hand, Non-performing assets (NPAs) is considered as one of the biggest problems for the entire Indian banking industry as the profitability of many banks is adversely affected by the increasing level of NPAs. It is very important to understand and evaluate current risk management practices to determine excess capital/excess loss that can be attributed to an asset class. Risk management techniques help in effective capital allocation by banks; thereby helping in increase in profitability of banks and controlling the increasing NPAs to acceptable levels.

KEYWORDS: Historical Simulation, Monte Carlo Simulation, Risk Management, Non-performing Assets.