Credit risk, primarily driven by rising NPAs, is one of the most significant challenges faced by Indian banks, especially public sector institutions. The study investigates how banks have responded through improved credit appraisal systems, stressed asset management, and stringent monitoring mechanisms. The paper also examines operational risks, which have grown with the expansion of digital banking, requiring banks to invest heavily in cybersecurity and internal controls. Additionally, market risk, driven by global economic fluctuations, and liquidity risk due to asset-liability mismatches are evaluated.

Regulatory frameworks, particularly those introduced by the Reserve Bank of India (RBI), play a vital role in shaping the risk management strategies of Indian banks. Key regulations like the Basel III norms, prudential NPA standards, and risk-based supervision (RBS) are analysed to understand their impact on improving the resilience of the banking sector.

Despite the advancements in risk management strategies, challenges such as high NPAs, cyber threats, regulatory compliance, and global economic volatility continue to persist. Case studies of the IL&FS and Yes Bank crises are presented to underscore the importance of robust risk management practices.