Skip to main content
Back Custom print Text Only Rich Text Print / Save as PDF
Download Original PDF

  • 4. Organizational Structure

    The overall structure for credit risk management should be commensurate with the bank’s size, complexity of operations and diversification of its activities. The organizational structure should facilitate effective management oversight and proper execution of credit risk management and control processes. While the organizational structure may vary from bank to bank, it would generally comprise of the following: 
     

    • 4.1. Credit Risk Management Department or a Unit

      Such department or unit can be part of the overall risk management function of the bank but should be independent of the loan origination function. This department or unit should be responsible, inter alia, for the following: 
       
        a.Monitoring adherence to the overall risk tolerance limits set out in the Credit Policy of the bank;
       
        b.Ensuring that the business lines comply with the established credit risk parameters and prudential limits;
       
        c.Establishing the systems and procedures relating to credit risk identification, internal risk rating approaches, Management Information System, monitoring of loan portfolio quality and early warning;
       
        d.undertaking portfolio evaluations and conducting comprehensive studies on the environment to test the resilience of the loan portfolio;
       
        e.Coordinating on remedial measures to address deficiencies/problems in credit portfolio;
       
        f.Other matters relating to credit risk management.
       

    • 4.2. Credit Risk Management Committee

      This Committee will be a management committee and responsible for monitoring of credit risk taking activities and overall credit risk management function. This Committee can either be a separate committee comprising of the heads of relevant functions depending upon their size, organizational structure and corporate culture or these responsibilities can be assigned to the overall Risk Management Committee of the bank. Its terms of reference may include, inter alia, the following: 
       
        a.Ensure implementation of the credit risk policy / strategy approved by the Board;
       
        b.Monitor credit risk on a bank-wide basis and ensure compliance with limits approved by the Board;
       
        c.Providing input in formulation of credit policy of the bank particularly on credit risk related issues including, for example, setting standards for presentation of credit proposals, financial covenants, rating standards and benchmarks, etc.;
       
        d.Make Recommendations to the Risk Management Committee or any other relevant committee of the Board on matters relating to delegation of credit approving powers, prudential limits on large credit exposures, standards for loan collateral, portfolio management, loan review mechanism, risk concentrations, risk monitoring and evaluation, pricing of loans, provisioning, etc. as and when required;
       
        e.Dealing with any other matters relating to credit risk management.
       
      The Credit Risk Management Department or Unit will provide necessary support to the Credit Risk Management Committee in discharging its responsibilities.