The effective management of credit risk is a critical component and essential to the long-term success of any banking organization. Banks need to manage the credit risk inherent in the entire portfolio as well as the risk in individual credits or transactions. There have been conscious efforts in minimizing the credit risk without affecting the business opportunities since the early days of banking. With the increasing volume of business and complexity in financial transactions, Credit risk management is imperative. Risk management is relatively easy in stable environments and under predictable circumstances of interest rates. However, increasing volatility in the markets has made credit risk management more complex. Effective Management of credit risk helps to maintain robust financial health and increases internal efficiency.