• Nikhil Sharma

In an increasingly complex and interconnected financial environment, effective management of credit risk is fundamental to the sound functioning and sustainability of the banking sector. Credit risk refers to the possibility of a loss resulting from a borrower’s failure to repay a loan or meet contractual obligations. The robustness of credit risk assessment practices significantly influences the health and resilience of banks. This research paper investigates the pivotal role played by credit risk assessment tools in strengthening the Indian banking system, with a focused case study on the Bank of India—one of the country’s premier public sector banks. The study delves into the evolving landscape of risk assessment frameworks, ranging from traditional credit scoring models to contemporary AI-powered predictive tools. It examines the impact of these tools on key performance indicators such as Non-Performing Assets (NPAs), Capital Adequacy Ratio (CAR), and Provisioning Coverage Ratio (PCR), which are vital in maintaining financial equilibrium. Furthermore, it highlights the influence of regulatory guidelines like the Basel norms and RBI's supervisory directives on the deployment of credit risk tools across banking institutions. Through secondary data analysis and a review of the Bank of India’s risk management policies, this paper explores the practical implementation, benefits, and challenges of credit risk assessment mechanisms. The findings underscore that the strategic use of these tools not only enhances risk prediction and decision-making but also fortifies the bank’s ability to withstand economic shocks and borrower defaults. This research contributes to a deeper understanding of the relationship between sound credit risk assessment and financial stability, advocating for greater adoption of advanced risk analytics across Indian banks. It concludes with key recommendations aimed at optimizing credit risk frameworks to ensure a resilient and inclusive banking ecosystem.

Credit Risk, Credit Rating, Risk Assessment Tools, Financial Stability, Non-Performing Assets (NPAs), Bank of India, Risk Management, Basel Norm

"Role of Credit Risk Assessment Tools in Strengthening Indian Banking System: A Case Study of Bank of India", International Journal of Emerging Technologies and Innovative Research (www.jetir.org), ISSN:2349-5162, Vol.12, Issue 5, page no.e638-e649, May-2025, Available :http://www.jetir.org/papers/JETIR2505546.pdf

"Role of Credit Risk Assessment Tools in Strengthening Indian Banking System: A Case Study of Bank of India", International Journal of Emerging Technologies and Innovative Research (www.jetir.org | UGC and issn Approved), ISSN:2349-5162, Vol.12, Issue 5, page no. ppe638-e649, May-2025, Available at : http://www.jetir.org/papers/JETIR2505546.pdf