Abstract:
Credit risk management in commercial banks has become more important not only
because of global financial crisis that was experiencing, but also as a crucial concept
which determines banks’ survival, growth and profitability. Since granting credit is one
of the main sources of income in commercial banks, the management of the risk
related to that credit affects the profitability of the banks. The main purpose of this
study is to investigate the impact level of credit risk management on profitability in ten
commercial banks in Sri Lanka during the period of 2006 to 2014. For this purpose
the study employed regression analysis trough SPSS. The study considered ROE
(Return on Equity) as profitability indicator while Non- Performing Loan Ratio (NPLR),
Lesser Prudence (LP) and Loans to Deposits (LD) are considered as credit risk
management indicators. The findings and analysis reveal that credit risk management
has an impact on profitability. The findings reveal that three credit risk management
indicators of have a significant negative impact on profitability.
