The paper deals in credit risk management in which rating of credit risk is done in order to assess and control the overall loss within the limits sustainable by the capital of the bank which is very often referred to as the risk appetite of the bank. Effective credit risk management is a critical component of a bank’s overall risk management strategy and is essential to the long-term success of any banking organization. Having understood the broad parameters of the credit rating I have also learnt that there are various kinds of risks (both internal and external) involved in estimating the rating of a particular borrower or company which are the important factors which are to be taken into consideration to reduce the risk involved of default by borrower. The overall process of credit risk management includes four major functions risk identification, risk measurement, risk control and risk monitoring.