Credit Risk Management Practices and Financial Performance of Selected Rural Commercial Banks in China

Abstract

The researcher investigated the effect of credit risk management practices on the financial performance of rural banks. The researcher examined the suitable credit risk environment, credit giving procedures, credit administration, monitoring, and control, and evaluated the substantial influence of these practices on the banks' financial performance. Further, the researcher drew conclusions based on the study findings to which rural Banks has a comprehensive written credit risk management policy in place, and the board of directors is responsible for its execution. To ensure financial stability, credit risk management should be central to a bank's activities. Credit risk management refers to the systems, processes, and controls that a corporation has in place to ensure efficient consumer payment collection and reduce the risk of nonpayment. To attain the goal of wealth maximization, banks must properly manage their assets, liabilities, and capital. Credit policy should include the bank's lending philosophy, particular procedures, and methods for monitoring lending activities. The study found that credit risk management practices had no meaningful impact on rural bank financial performance.