Comparative Study on Credit Monitoring Practices in Slected Banks of Nepal

Abstract

Credit monitoring is performed by the banks as post approval activities for existing credit clients to indentify the early warning single of credit risk. So that, the study was accomplish to observe the credit monitoring practice in Nepalese commercial banks.  The study was based on a sample of 10 commercial banks, comprising 5 private sector banks and 5 joint venture banks.  This paper attempts to determine the awareness of Nepalese bankers about the significance of credit monitoring as risk identification tools. The result of the study indicates that the periodically review of the security documents, credit processing procedure, compliance of covenants setup during credit approval, technique to control default, risk reporting, review of loan account and regular follow-up  were differently used as credit monitoring practice in  private sector and joint venture  banks in Nepal. These factors also found significant predictor for credit monitoring. Moreover, there was a positive relationship between credit monitoring practice and its factors instead of technique to control default.Credit monitoring is performed by the banks as post approval activities for existing credit clients to indentify the early warning single of credit risk. So that, the study was accomplish to observe the credit monitoring practice in Nepalese commercial banks.  The study was based on a sample of 10 commercial banks, comprising 5 private sector banks and 5 joint venture banks.  This paper attempts to determine the awareness of Nepalese bankers about the significance of credit monitoring as risk identification tools. The result of the study indicates that the periodically review of the security documents, credit processing procedure, compliance of covenants setup during credit approval, technique to control default, risk reporting, review of loan account and regular follow-up  were differently used as credit monitoring practice in  private sector and joint venture  banks in Nepal. These factors also found significant predictor for credit monitoring. Moreover, there was a positive relationship between credit monitoring practice and its factors instead of technique to control default.