31-08-2017, 12:56 PM
Risk management in Indian banks is a relatively new practice but has already been shown to increase the efficiency of government of these banks, as such procedures tend to increase the corporate governance of a financial institution. In times of volatility and fluctuations in the market, financial institutions must prove their worth by resisting market variations and achieving sustainability in terms of growth and as well as having a stable stock value. Therefore, an essential component of the risk management framework would be to mitigate all the risks and rewards of the products and services offered by the bank. Therefore, the need for an efficient risk management framework is paramount to take into account internal and external risks.
The financial sector in several economies such as India are experiencing a monumental shift taking into account global events such as the current banking crisis around the world. The 2007 recession in the United States has highlighted the need for banks to incorporate the concept of Risk Management into their usual procedures. The various aspects of increasing global competition for Indian banks by foreign banks, increased deregulation, the introduction of innovative products and financial instruments, as well as innovation in distribution channels have highlighted the need for Indian banks to prepare themselves in terms of risk management.
Indian banks have been making great strides in terms of technology, quality as well as stability in such a way that they have begun to expand and diversify at a rapid pace. However, this expansion brings these banks into the context of risk, especially at the beginning of globalization and liberalization. In banks and other financial institutions, risk plays an important role in the profits of a bank. The greater the risk, the greater the return, therefore, it is essential to maintain a parity between risk and return. Therefore, financial risk management incorporating a set of systematic and professional methods, especially those defined by Basel II, becomes an essential requirement of banks. The more risk a bank is, the safer its capital base.
The financial sector in several economies such as India are experiencing a monumental shift taking into account global events such as the current banking crisis around the world. The 2007 recession in the United States has highlighted the need for banks to incorporate the concept of Risk Management into their usual procedures. The various aspects of increasing global competition for Indian banks by foreign banks, increased deregulation, the introduction of innovative products and financial instruments, as well as innovation in distribution channels have highlighted the need for Indian banks to prepare themselves in terms of risk management.
Indian banks have been making great strides in terms of technology, quality as well as stability in such a way that they have begun to expand and diversify at a rapid pace. However, this expansion brings these banks into the context of risk, especially at the beginning of globalization and liberalization. In banks and other financial institutions, risk plays an important role in the profits of a bank. The greater the risk, the greater the return, therefore, it is essential to maintain a parity between risk and return. Therefore, financial risk management incorporating a set of systematic and professional methods, especially those defined by Basel II, becomes an essential requirement of banks. The more risk a bank is, the safer its capital base.