International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528 http://www.researchersworld.com/ijms/ Vol.–VI, Issue –2(1), April 2019 [48] DOI : 10.18843/ijms/v6i2(1)/06 DOI URL :http://dx.doi.org/10.18843/ijms/v6i2(1)/06 Measurement and Comparision of Credit Risk Management Practice of Public and Private Banks Using Lending Ratios Reshma Prabhu Verlekar, Assisstant Professor, Department of Accountancy, S.V.S Sridora Caculo College of Commerce and Mgmt. Studies, Khorlim, Mapusa, Goa, India. Dr. Manoj S. Kamat, Principal, Shree Mallikarjun College, Cancona, Goa, India. ABSTRACT One of the most important service sectors for the development of Indian economy is the banking sector. Any harm to the banking sector will endanger the Indian economy. This harm can be due to improper management of Credit Risk Management Practices (CRMP) resulting into increased NPA’s. This demands a need for proper use of credit risk measurement tools such as lending ratios for management of credit risk. In practice, the application of credit risk measurement tools vary from bank to bank. Therefore, the present study is based on the aim, to measure the Credit Risk Management Practices of public and private banks using lending ratios as a credit risk measurement tools. The hypothesis for the present study states that, there is significant difference in the credit risk management practices used by public and private banks in India. The study used Independent sample T-test and ANNOVA on eight lending ratios to seek the significant mean difference in the CRMP of public and private banks in India. The result reveals that, although there is similarity in the trend of certain ratios over the thirteen years period under study, the sector wise comparison showed statistical significant differences between the public and private banks with regards to certain six lending ratios used in the paper. However there was no significant difference in the other two ratios used in the paper. The study can be further extended to cover other lending ratios that have impact on the credit risk and can include foreign banks in the other studies. Keywords: Credit Risk Management Practices (CRMP), Banking Sector, Credit Risk Tools, India. INTRODUCTION: In today’s era, banks are more serious about their long term success and survival, due to increased Non Performing Asset (NPA) over a period of time. NPA’s is an asset which ceases to generate income for the bank. When the borrower could not pay interest or installment on loan which remains overdue for more than 180 days then it becomes Non- performing. As per RBI data the gross NPA ratio shows an increasing trend from the year 2009 (2.31%), 2013 (4.27%) and in 2018 (14.6%). (Pasha, 2013), found in his studies that NPA of banks showed an increasing trend. An increased NPA’s shows that, banks are facing credit risk. Credit risk is the potential that the banks borrower or the counterparty fails to meet obligation according to agreed terms, resulting into NPA’s. The efficiency and the strength of banking companies depend on their ability to absorb and adjust to the ever-changing environment as quickly as possible (Verlekar and Kamat, 2017). Credit risk is most important because it has substantial effect on the return on investment of the bank. Also, according to (Ngoroge & Ngahu, 2017), credit risk is a big threat for banks as the value of any organization is measured by its credit worthiness. According to (Verlekar & Kamat, 2015)Kamat and Verlekar (2015) credit risk is critical, as the default of a small number of important customers can generate large losses. Effective Credit Risk Management Practice (CRMP) need to be followed by banks, to reduce credit risk . CRMP are even essential today for compliance of regulations. Banks are