Credit Risk Management of Manufacturing Companies in India

The manufacturing companies play a significant role in the development of an economy. The sales of manufactured product are the source of revenue of these companies. Like other companies, manufacturing companies try to maximise their sales in order to achieve the maximum profit and market share. Sales are of two types, cash sales and credit sales. Credit sales generate accounts receivables and sometimes they may be followed by default in payment result in credit risk. Credit risk adversely impacts the manufacturing companies in India by reducing their profits thereby threatening their survival. There is a need for effective credit risk management that helps to safeguards the financial health of manufacturing companies there by supporting sustainable business growth and development in the economy. Therefore, it is necessary to understand the prevalence and magnitude of credit risk, current risk management practices for formulating a model for effective credit risk management in Indian manufacturing companies.