The emergence of risk management is an organized effort which is only a recent phenomenon that happened especially after the opening up of the banking sector to the private and outside players in the wake of banking sector reforms. Risk management strategy and its application had been neglected because of excessive state intervention in the functioning of banks .Direct lending, administered interest rates, target oriented performance emphasizing expansion and extension, meeting of credit targets irrespective of the attendant risks. Therefore the main objective of the study on the concept of risk management in the banking sector and the concept of credit risk. Credit risk is the bank’s risk of loss arising from a borrower who does not make payments as promised. Such as event is called as default. Another term for credit risk is default risk.