The main purpose of this study is to investigate the effect of credit risk on the financial performance of commercial banks in Nepal. The balance panel data of ten commercial banks with 160 observations for the period of 2001 to 2016 have been used for the analysis. The regression results revealed that capital adequacy ratio (CAR), non-performing loan ratio (NPLR), and management quality ratio (MQR) have significant relationship with the financial performance (ROA) of the commercial banks in Nepal. Similarly, credit to deposit ratio (CDR) and risk sensitivity (RS) have no significant impact on the financial performance of the commercial banks in Nepal.
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