GAP iNTERDISCIPLINARITIES A Global Journal of Interdisciplinary Studies ( ISSN – 2581-5628 ) Impact Factor: SJIF - 5.047, IIFS - 4.875 Globally peer-reviewed and open access journal. GAP iNTERDISCIPLINARITIES – Volume - IV Issue I January – March 2021 36 https://www.gapinterdisciplinarities.org/ CREDIT RISK EXPOSURE OF SELECTED NEW PRIVATE SECTOR BANKS IN INDIA WITH REFERENCE TO ASSET LIABILITY MANAGEMENT Miss Deepa Chandwani, Dr. Gurudutta Japee Ph.D. Research Scholar, Gujarat University, Ahmedabad deepachandwani1@gmail.com Research Guide, Gujarat University,Ahmedabad profgurudutta@gmail.com Abstract Asset Liability management of a bank refers to strategic decision making and devising strategies with respect to mitigation of different types of risk with a core objective of risk minimization and profit maximization. Banks are exposed to varied types of risk of which credit risk is crucial as it enhances the risk of insolvency and bankruptcy of a bank. It arises when borrowers turn out to be defaulters. Credit risk not only wipes out the capital of the banks but also hampers the present and future earnings of the bank. The present paper analyzes the credit risk of selected private sector banks to know if the Asset Liability management (ALM) policy of a bank with respect to credit risk is effective or not. The different measures of Credit risk as Gross Non-performing assets and Net Non- performing assets are analyzed using One-Way Anova to see if credit risk of selected banks is significantly different or not. Keywords: Asset Liability management, Credit risk, Gross Non-performing assets, Net Non-performing assets and Provision Coverage ratio. 1. INTRODUCTION The recent financial crisis in capital markets and the role of banks brings attention to the existing risk management systems and how they fall short in actually managing their credit risks. The ILFS, Jet Airways and DHFL defaults are just a few among the major losses caused by the failure of their lenders and counterparties in timely payment of interest and capital on their contracts. With an incessant increase in defaulters wiping out huge funds from the financial system, second recession after 2008 may be a reality waiting to happen. But so far, the banking industry has survived because of the management of Credit risk. Credit Risk has always been a crucial area for financial institutions that also face varied risks such as operational risks, technological risks, talent risks, interest rate risk, forex risk, market risk and liquidity risk. The research focuses on finding out the following aspects: Is credit risk of all the banks the same? Does ALM strategy with respect to credit risk effective in addressing credit risk issues in various banks? Is management of credit risk in banks effective or failed to address the default issues of borrowers? Credit risk not only wipes out the capital of the banks but also hampers the present and future earnings of the bank. It reduces the credit assets value with deterioration in a portfolio or individual’s credit quality. 1.1 DEFINITIONS Credit Risk - The Basel Committee on Banking Supervision (or BCBS) defines credit risk as “the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with the agreed terms.” It includes both the uncertainty involved in repayment of the bank’s dues and repayment of dues on time. According to the Basel Committee on Banking Supervision (2001), the most common cause that leads the banks to bankruptcy is credit risk. The main sources of credit risk that have been identified in the literature include limited institutional capacity, inappropriate credit policies, volatile interest rates, poor management, inappropriate laws, low capital and liquidity levels, massive licensing of banks, poor loan underwriting, reckless lending, poor credit assessment, lack of rigorousness in credit assessment, poor lending practices, government interference, inadequate supervision by the central bank and information asymmetry. Asset Liability Management - Wikipedia defines Asset and liability management (ALM) as the practice of managing financial risks that arise due to mismatches between the assets and liabilities as part of an