The significant problem faced by banking sector during the global financial crises was critical importance and measurement of credit risk. After August 2007, the environment of world trade is worsened. Banking sector faced many risks after the dynamic and rapid changes in global financial landscape. The risk exposure in banking sector also increased due to market flexibility, changes in socio-economic pattern and foreign exchange business. These development and innovation create various types of risk in banking sector. Credit risk is main risk which faced by the banking sector. This study examines the bank specific, banking industry specific and macro economic determinants of credit risk. For the analysis of unbalance panel data Random Effect Model has been used in this study. For 21 banks, 10 years annually data is uses in this study. Results of this study indicate that bank ownership has negative and insignificant relationship with credit risk. Efficiency of management has negative and significant relationship with credit risk in CR1 models but insignificant relationship in CR2 models. Financial sector development has positive and significant impact on credit risk in CR1 models but insignificant impact in CR2 models. Competition and GDP growth rate variables have negative and insignificant impact on credit risk in CR1 models and positive and significant in CR2 models. Inflation Rate has positive and significant relationship with credit risk in both CR1 and CR2 models Supervisor:- Dr. Arshad Hassan