Banks are exposed to credit risk in terms of various loans which has been offered across the portfolio and banks need to manage their existing credit risk because they need to maximize their rate of return by eliminating the the risk of default, so they will be undertaking various kinds of derivatives contract in order to manage with the risk, and they will be trying to maximize their quality of the overall credit portfolio in order to manage with the existing credit risk so they will be trying to only offer loans to those who are having a very high creditworthiness and they will be trying to monitor the loans continuously and they will be also so hedging it with derivatives so, the overall credit risk in the bank can be negated to certain extent.

New credit application should be analysed properly by looking into their creditworthiness and looking into their capability of repayment of loan in the future after ascertainment of the business conditions in the future because the conditions will not be similar and there need to be a proper analysis of the risk associated with default on the losns,so there should be a proper adjustment of the interest rates and other rates in associated with the the payment of loans, because it will be trying to proactively discount the risk in advance and stay which conservative, so I will be trying to analyse new application after discounting of risk and analysing proper creditworthiness.