While risk has always been a part of financial activity, the 1990's saw risk management become a key business function within banks and other financial institutions. Major reasons for its growth in importance were the large losses incurred by some huge global companies during the 1990's, which shocked financial institutions into placing more emphasis on risk management and controls. In recent decades credit risk has become pervasive. Companies borrow to create acquisitions and to grow, small business borrow to expand their capacity and individuals use credit for other purpose. At the international banking arena, there's relentless effort for creating the financial supervision extremely efficient and proactive to cope with the unprecedented and sudden risks emanated from the system. As there are increased number of innovative products within the portfolio of most of the banks, which provides them competitive edge over others, at the identical time they're facing increased level of uncertainty due to the volatility of the market. They need to strengthen internal controls, enhance disclosure and transparency of economic information and ensure effective supervision, so as to take care of the sound operation of the banking and financial markets. This includes identifying and quantifying various risks before, in addition as establishing and ending effective risk management. Basel committee has already prescribed Basel III norms, although there's a growing concern amid worldwide banking fraternity that whether the banks those are operating in a very fragile position under Basel II regime, could manage themselves to keep up the minimum Capital Adequacy Ratio (CAR, which is 2% above the previous one) and remain profitable. Most of the central banks across the nations try hard to manage their economic system during a systematic way, so as RBI just in case of India.

KEYWORDS: Risk Management, Credit Risk Analysis, Credit management, Financial Market, Banking Structure.