CHAPTER ONE
INTRODUCTION
1.1 Background of the Study.
The impact of credit management and control on commercial banks stability play a crucial role in development of the economy. Commercial banks, now universal banks are the ordinary financial institutions which deal in credit partly by lending the bulk of the deposits accepted from members of the public but mainly by creating money. It is the ability to create credit through the giving of loans and overdrafts with distinguishes commercial banks from other financial institutions. The bank forms a source of mobilization of investible funds for the links, with its domestic and foreign countries; it is capable of mobilizing funds for industrial growth and development of the county.
Lending is an essential financial function of the commercial banks. Through lending, bank management strives to satisfy the legitimate credit intends to serve. It is also beyond doubt that bank loans considered as the heart of banking business contribute materially to banks profitability by providing a higher return than most other bank assets and being a key element in the creation and maintenance of depositor relationships. However, every commercial bank in this country holds the majority of its assets in the form of loans and advances. The banks major concern is the maintenance of adequate liquidity and reserve asset possession as required by the central bank. Commercial banks are equally multi-purpose. Lender satisfy the needs of entrepreneurs, commerce, industry, agriculture e.t.c. Lending practice of more a variant rather than a replica of the other banks, for example, two lending officers sitting side by in the same bank react differently to the same loan request not to talk of two different banks.
Since lending creates the greatest income yielding assets of a bank, precaution have to be taken to ensure that such an asset possesses and retains every essential quality that would minimize the incidence of risk normally inherent in lending and commercial bank generally can not administer or disburse loans on their accord without adhering strictly to the central banks monetary and credit policy guidelines for that particular fiscal year. In performing its statutory and regulatory functions, the CBN issue some credit guidelines usually in form of monetary policy circulars to commercial banks in respect of their general operations as they affect the economy in the country.
This study is based on bank and they are germane to economic development through the financial services they provide. Their intermediation role can be said to be a catalyst for economic growth. The efficient and effective performance of the banking industry over time is an index of financial stability in any nation. However, it exposes the banks to credit risk. The Basel committee on Banking Supervision (2001) defined credit risk as the possibility of losing the outstanding loan partially or totally, due to credit events (default risk). The higher the exposure of a bank to credit risk, the higher the tendency of the banks to experience financial crisis and vice-versa.