Lax credit standards can jeopardize the existence of a bank. Major building blocks to its management are skilled and experienced manpower and innovative technology. Basel II has suggested various innovative approaches to manage the credit risk. Due to huge investment and skills required with adoption of advanced approach, Indian banks have been instructed by the RBI to adopt standardized approach initially and upgrade later on to more sophisticated approaches.

The `Fulcrum' of risks in Commercial Banking lies with the extension of credit (including investment in securities) function of Commercial Banks. This category of risk has a dominant influence in the safety and soundness of a bank's well-being in as much as generally 90 to 95% of banking business is shared by Credit/Investment portfolio.

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