The number of consumer loans is very large, in addition to the high interest rates on credit cards, banks' profits from credit cards are quite large.
Because the prospect of profit as well as the scope of customers in the field of credit card is very large, for most developed countries today, credit card has become one of the key revenue sources of commercial banks, playing a key role. in banking services, has an important meaning in banking management. Exploiting the field of credit CVD continues to promise many prospects in the future. In developing countries, credit card is also gradually asserting its role, bringing significant profits in lending activities of commercial banks.
• Types of consumer loans
Many lending methods are offered by commercial banks to facilitate customers. Based on the loan demand of the customer, the credit level of the bank towards the customer, the two parties agree to choose a lending method among the following methods: For direct consumer lending
Periodic payment loan: is a method in which the customer borrows and pays directly to the bank with the payment rate and payment time specified when lending. Overdraft: is a transaction that allows an individual to withdraw money from his or her current account in excess of the balance up to an agreed limit. Credit card: is a business in which the Bank issues cards to those who have accounts with the Bank that are eligible for the card, and sets the maximum credit limit that the cardholder is allowed to use. For indirect consumer loans Full recourse financing: is a form of when selling to the Bank the debts that the consumer has purchased on credit, the retail company will commit to pay the Bank in full if it comes to the bank. at the end of the term, the consumer does not pay the Bank. Limited recourse funding:is the method in which the retail company, after selling the debts purchased on credit by the consumer to the Bank, will commit to pay the Bank a part of the debt if the consumer does not pay the Bank when it is due. . Non-recourse financing: is a form of financing where, after selling debts to the Bank, the retail company is not responsible for whether they are repaid or not. This method carries a very high risk, so the debt is selected very carefully and only reliable retail companies apply this method. Buy-back financing: When following this method, if there is a risk of consumer default, the Bank will sell back to the retailer the unpaid portion of the debt with the assets already paid. consumed within a certain period of time. is a form of financing where, after selling debts to the Bank, the retail company is not responsible for whether they are repaid or not. This method carries a very high risk, so the debt is selected very carefully and only reliable retail companies apply this method. Buy-back financing: When following this method, if there is a risk of consumer default, the Bank will sell back to the retailer the unpaid portion of the debt with the assets already paid. consumed within a certain period of time.is a form of financing where, after selling debts to the Bank, the retail company is not responsible for whether they are repaid or not. This method carries a very high risk, so the debt is selected very carefully and only reliable retail companies apply this method. Buy-back financing: When following this method, if there is a risk of consumer default, the Bank will sell back to the retailer the unpaid portion of the debt with the assets already paid. consumed within a certain period of time.If there is a risk of consumer default, the Bank will sell back to the retailer the unpaid portion of the debt together with the assets that have been consumed within a certain period of time.If there is a risk of consumer default, the Bank will sell back to the retailer the unpaid portion of the debt together with the assets that have been consumed within a certain period of time.
The role of consumer lending
Commercial banks' lending activities play an important role in socio-economic development. Lending activities help to open up financial flows, so that capital flows are continuously circulated. For the economy, the fact that commercial banks lend money to individual customers for consumption purposes is even more meaningful.
• For banks: First of all, credit card helps banks improve capital efficiency. As analyzed, credit card has high costs but at the same time also generates a larger profit on capital spent than other forms of lending. Credit card also helps the Bank to attract customers to use other forms of services such as money transfer or salary payment services via accounts at the Bank to facilitate payment of interest by term, use of other services. cards, promoting the bank's brand through customers. Customers also tend to use services at banks with which they have a credit relationship. This is a condition that helps the bank improve its competitiveness and expand its market share. In addition, credit portfolio contributes to diversifying investment fields, improving income, and spreading risks for banks.
• For consumers: CVTD helps consumers satisfy and improve the quality of their consumption, allowing consumers to use their solvency in the future and enjoy convenient services before they have enough. financial resources, especially in case of urgent spending. In cases of urgent need, the bank's lending interest rate is much more reasonable than the "hot" lending rate outside the market. The loan term and payment method are flexible based on the repayment ability of the customer. Conditions and procedures to get a consumer loan are not too complicated.
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• For manufacturers: CVTD creates favorable conditions for consumers to buy goods more and faster, helping to promote the production process, shorten capital turnover, and increase profits.
• For the whole economy: It can be said that credit card activities are a lever to stimulate production development, create conditions to promote economic growth, improve people's living standards, and contribute to hunger eradication and reduction. poor. CVTD contributes to improving the payment environment, reducing the amount of cash circulating in the market. From a macroeconomic perspective: retail banking services accelerate the cash flow process, take advantage of the great potential of the population for economic development, improve people's living standards, and limit cash use. and save time and money for society
1.2.2 Consumer lending process of commercial banks
The lending process is a summary of specific tasks that credit officers and relevant departments in the bank must perform when providing capital to customers. To standardize the process of contact, analysis, lending and debt collection, each commercial bank usually builds its own lending process. Among banks, the process may be different, depending on the characteristics and organizational management capabilities of the bank, but in general, they all include the following 6 steps: Step 1 Receive credit application: Customer has need to borrow capital to the bank to apply for a loan. Here, the credit officer guides the customer on how to make a complete and correct profile, the credit file usually includes: legal file, economic file and loan file. Step 2 Credit appraisal: This is an important step in the consumer lending process, determining credit quality. The wrong appraisal credit officer will make the wrong decision.The appraisal process includes: - Appraisal of loan characteristics - Appraisal of loan purposes - Appraisal of customer's financial situation and solvency - Appraisal of collateral
Step 3 Approval and loan decision: After the appraisal process, the credit officer will report back to the superior to submit to the review board and make a loan decision. After making a decision, the Bank must make a written notice to the Customer clearly knowing the content (if not, the reason must be specified in detail).
Step 4 Completing legal procedures and disbursing: After reviewing and approving a loan, the bank and the customer sign a credit contract. The main elements of a credit contract are:
• Customers: full name, address, legal status (if any).
• Purpose of use: Customer must specify what the loan is used for.
• The amount or credit limit that the Bank commits to grant to the customer.
• Applicable interest rate: interest rate that customer has to pay, fixed or variable interest rate, conditions for changing interest rates.
• The fee for obtaining a credit commitment from the bank, calculated as a percentage of the commitment limit.
• Loan term: is the period in which the bank grants credit to the customer, counting from the time the bank's first capital is issued until the last capital and interest is collected by the bank.
• Types of warranties: contents such as valuation, insurance, title, right to transfer or sell, right to use the guarantees must all be clearly stated in the contract.
• Conditions and terms of disbursement.
• How and when to pay principal and interest. Other conditions: control of collateral, control of borrower's business activities, conditions for asset sale, penalties for contract violations .
Step 5 Check during the lending process: After disbursing to the customer, the bank must control whether the customer uses the loan for the right purpose or not. Collecting information about customers: All information reflects in a good direction, showing that credit quality is being guaranteed. If the quality of the loan is threatened, it is necessary to take timely measures. The bank has the right to recover the debt early, stop disbursement if the borrower violates the credit contract. Step 6 Debt recovery or new credit decision: When the customer has paid off the principal and interest on time, the credit relationship between the Bank and the customer will end. However, besides safe credits, there are still credits that cannot be paid by the time of repayment. Therefore, the Bank must find out the reason and make a new decision: whether to extend the debt or sell the collateral to offset the risk.In short, the lending process should be built in accordance with the provisions of the law, with each group of customers, and with each type of bank's loan. The lending process must ensure that the bank has all the necessary information but does not cause trouble for the customer. A properly built lending process will increase operational efficiency, reduce risks and improve the bank's profitability.
1.2.3. Improving the quality of consumer loans of commercial banks
* The concept of improving the quality of consumer loans of commercial banks
The quality of consumer loans of commercial banks is reflected in the efficiency of capital use of consumer borrowers. Customers use loans for the right purposes and achieve consumer needs through the bank's sponsorship. Good quality consumer loans help banks recover principal and interest, cover costs and earn profits. This means that banks create both economic efficiency and social efficiency, which has a very positive impact on economic development. However, bank loans are still a big difficulty for consumers. Excluding loans from banks, in order to satisfy and improve consumer demand, consumers often have to borrow from unofficial sources. This source of capital is patchy, unstable, and has high costs, affecting the lives of consumers, and adversely affecting the economy. So,The important issue today is how to improve the quality of credit records of commercial banks.
Improving the quality of credit card is the way commercial banks improve the efficiency of consumer loans of individual customers for consumption purposes, thereby attracting more customers to the bank. Improving the quality of credit records is reflected in the increase in total outstanding loans, total loan turnover, reduction in the rate of overdue debts, and growth in the number of customers allowed to borrow capital at commercial banks. * Evaluation criteria for improving the quality of consumer loans of commercial banks
The level of improvement of credit CV quality is considered in some basic criteria as follows:
• Number of customers borrowing consumer loans at banks: this indicator is calculated in a certain period of time, usually one year. Its growth over the years shows that the quality of consumer loans is improving.
• Loan balance and loan turnover for consumer loans: Outstanding balance is the amount that the bank is lending at the end of the period. Loan turnover is the total amount of money the bank has lent out during the period. Outstanding debt is an indicator accumulated over time, calculated by the formula: DNCV this period = DNCV of the previous period + DSCV in the period - Debt collection in the period This is the indicator that best reflects the quality of the bank's credit history. If the credit balance of this period is larger than the previous period, or the loan turnover in the period is larger than the previous period, it can be confirmed that the quality of credit records is being improved.
• Growth rate of outstanding loans: DNCV this period - DNCV last period DNCV previous period This is an indicator that reflects how fast or slow the bank's loan quality improvement is. Over the years, this ratio indicates whether that rate is increasing or decreasing. If the indicator increases over the years, it can be seen that the rate of quality improvement is increasing. However, when using this indicator, it is necessary to combine with other indicators to draw the right conclusion. If the growth rate of outstanding loans is smaller than that of other lending groups, it cannot be said that the quality of credit records has been improved.
• Proportion of outstanding loans in total loans of commercial banks: Credit balances
Total outstanding loans of SMALL
The increase of this number also means that CVTD quality is improved. In short, the increase or decrease of the above indicators indicates that the credit portfolio quality of the bank is improving or decreasing. However, the conclusions drawn are accurate only when all four indicators are combined.
1.3 Factors affecting the improvement of consumer lending quality of commercial banks
1.3.1 Subjective factors
Subjective factors on the side of commercial banks have a great impact on the improvement or decrease of credit card quality. There are five factors as follows:
• Customer policy: Bank often conducts customer classification. Traditional customers, target customers, and high-ranked customers often enjoy many incentives from commercial banks. An attractive customer policy, a marketing policy aimed at a group of customers who are consumer loan customers will motivate consumers to borrow money at the bank. Since then, the quality of CVTD has been improved.
• Credit size and limit: In addition to the legal provisions on lending limits, each bank often has its own regulations on the size and limits for each specific customer. For example, the maximum loan size for each customer, each industry, the loan size on the value of the collateral.
The policy on credit size and limit directly affects the size of credits that customers receive from the bank. When wanting to improve the quality of credit cards, banks will have to relax this policy in the direction of increasing the scale and expanding the lending limit for consumer loans.
• Interest rate policy: the lending interest rate of commercial banks has a great impact on the demand for loans of consumer loans. A high interest rate will limit customers' willingness to borrow, because of the high cost of capital. On the contrary, the bank will apply low lending interest rates when it wants to improve the lending quality for consumer loan customers. Low capital costs contribute to reducing cost burden for customers. At that time, many customers looked to banks to borrow capital for their consumption needs. The number of customers taking out consumer loans at banks has increased, which means that the quality of credit cards has improved.
• Policy on guarantees: Security policy includes regulations on: loan must have collateral, forms of security, percentage of loan on security Normally, Banks only lend to a limit lower than the market value of the security. The loan percentage depends on the ability to sell and the ability to change the value of the collateral. The higher this ratio, the larger the scale of capital that the customer receives from the bank. In contrast, the policy on guarantees too tight will hinder the ability to improve the quality of credit records of commercial banks.
Credit policy: Credit policy reflects the funding program of a bank. Therefore, it is the leading factor affecting CVTD activities. Basically, the content of credit policy includes customer policy, marketing policy, policy on credit size and limit, interest rate policy and credit term, policy on guarantees.
Lending process: A cumbersome, complicated and time-consuming lending process often loses business opportunities of customers. Therefore, the bank's lending procedures need to be simple and reasonable, both to ensure that the bank has the necessary information and not to cause trouble for the customer. This will attract many customers to the bank to borrow capital. Size and capital structure of commercial banks
This is a factor that greatly affects the quality of CVTD. With abundant capital, commercial banks will be easier to apply credit policies to improve loan quality. On the contrary, if the bank's capital mobilization activities face difficulties, the bank will not be able to meet the borrower's loan demand. The lack of capital causes banks to increase deposit rates, thereby increasing lending rates. At that time, the bank's competitiveness is reduced and the goal of improving the quality of credit records is difficult to achieve. Besides, the capital structure of the bank also affects the quality of credit documents. If the proportion of short-term capital is too large, the bank will not have enough medium and long-term sources to finance customers' long-term capital needs such as real estate purchases. Improving the quality of CVTD is also more difficult. NHM's staff
The service industry has a prominent feature that service quality depends a lot on human factors. NH is a business providing financial services. Bank employees often interact with customers, therefore, are the representative image of the bank in the eyes of customers. A team of qualified, professional staff, attentive and enthusiastic service attitude will leave a good impression on NH. Customer satisfaction will help improve the quality of credit records of commercial banks more convenient. Branch network and facilities and equipment of commercial banks
The number and distribution of branches of the bank also affect the ability to improve the quality of credit records. Customers often transact with banks that are geographically located near their operations to reduce costs in terms of time and means of transportation. Therefore, improving the quality of credit records will be more effective if commercial banks have a thick and wide branch network, spacious and polite offices and transaction offices.
1.3.2 Objective factors
Factors from the customer