This study examines credit risk management in commercial banks, with particular attention to the Indian banking system during 2015–2026. Credit risk—the risk of loss arising from borrower default—remains the single largest source of risk in bank balance sheets, and its management determines banking soundness, profitability and financial stability. The paper uses an evidence-synthesis methodology built on Reserve Bank of India (RBI) Financial Stability Reports, Basel Committee frameworks, IMF and World Bank assessments, and published academic research. The study traces the full asset-quality cycle of Indian scheduled commercial banks: a recognition-driven peak in stressed assets around 2017–18, followed by a sustained clean-up supported by the Insolvency and Bankruptcy Code (IBC), recapitalisation, tighter provisioning and improved underwriting. System-level gross non-performing assets (GNPA) declined from about 11 per cent of advances in March 2018 to roughly 2.4 per cent by March 2025, while capital adequacy strengthened well above the 9 per cent regulatory minimum. The paper then presents the four-stage credit risk management cycle—identification, measurement, mitigation and monitoring—and the quantitative toolkit used by modern banks, including credit scoring, rating-based probability of default (PD), loss-given-default (LGD), expected loss (EL = PD × LGD × EAD), risk-adjusted return on capital (RAROC), stress testing and early-warning systems. It also maps the regulatory architecture of Basel III, the Prompt Corrective Action (PCA) framework, prudential provisioning norms and the IBC. The evidence shows that credit risk cannot be eliminated, only priced, provisioned, diversified and managed. Banks that combine robust underwriting culture, data-driven models, sectoral diversification and strong recovery infrastructure demonstrate lower slippage, higher provision coverage and more stable returns. The study concludes that effective credit risk management is not merely a compliance exercise but the core discipline that converts credit intermediation into durable shareholder value and systemic stability.

Yash Dnyaneshwar Bondre, Dr. Ujwala Narkhede, "Impact of Credit Risk Management on the Soundness of Commercial Banks" International Journal of Scientific Research and Engineering Development, V9(5): Page(1080-1089) September - October 2026. ISSN: 2581-7175. www.ijsred.com. Published by Scientific and Academic Research Publishing.