International Research Journal of Commerce , Arts and Science

 ( Online- ISSN 2319 - 9202 )     New DOI : 10.32804/CASIRJ

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CREDIT RISK MANAGEMENT SYSTEM

    1 Author(s):  PARVEEN KUMAR

Vol -  6, Issue- 4 ,         Page(s) : 95 - 99  (2015 ) DOI : https://doi.org/10.32804/CASIRJ

Abstract

Credit risk is inherent to banking activity. The financial asset the most concerned with credit risk is loan followed by bonds but in a smaller extent. However, other products such as OTC derivatives, Asset Backed Securities and Structures bonds, inter-bank transactions, commitments and guarantees are also more and more affected by credit risk. Credit risk is the risk that one party bounded by a financial contract is unable or unwilling to fulfil his obligations in due time, causing a financial loss for the other party. When the borrower defaults, the next exposure for the lender is the amount owed by the borrower. However, the final loss incurred equals the net exposure (including protection that the creditor holds such as third party guarantees, collateral…) minus the amount that can be recovered by the collection agencies

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