The lending process begins when the credit officer receives the customer's application and ends when the credit contract is finalized and liquidated. The lending process is drafted by the Credit Policy and Management Department with the aim of helping the lending process to be unified, scientific, limiting, preventing risks and improving credit quality. Commonly applied to the entire Industrial and Commercial Banking system . As described in section 18.104.22.168 Consumer lending process of commercial banks, consumer lending process at branches also includes 6 steps:
Step 1 Get credit file Step 2 Credit appraisal
Step 3 Review and decide on a loan
Step 4 Complete legal procedures and proceed with disbursement Step 5 Check during the loan process
Step 6 Collect debt or make a new credit decision
2.2.5 Situation of consumer lending at Ba Dinh Branch of Industry and Trade Bank
Facing the strong development trend of consumption activities, credit card activities in the industry are increasingly focused. In the period 2005-2007 Ba Dinh Branch of Industry and Trade Bank has achieved positive results. This is reflected in several aspects:
*Consumer loan balance
Table 2.4 Loan balance structure by term
Unit: Billion VND
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(Source: Data from CVTD 2005-2007, Department of Individual Customers Branch of Bank of Incorporation BD)
Firstly, the credit balance of the industry has grown continuously over the years at a high and stable rate. Specifically, in 2006 outstanding loans increased by 90.5% compared to 2005, in 2007 increased by 40% compared to 2006. In addition, the growth rate of outstanding loans of the following year was higher than the previous year, showing that the credit quality of the branch is gradually increasing. is enhanced.
Secondly, of the total outstanding loans at the branch, the outstanding balance of short-term loansalways accounts for a large proportion, about 60%. This is explained by the following reasons: One is that consumer loans to buy movable property such as vehicles, appliances, loans to support study abroad, loans to prove finance often account for a large proportion of loans. consumer loans, most of these loans are usually short-term. Real estate loans such as buying houses, residential land, and construction have high risks, long terms, and price fluctuations are very complicated, so they account for a smaller proportion. On the other hand, the consumer loan procedure for short-term loans is usually simpler and the lending conditions are easier. But the most important factor affecting the term structure of consumer loans is the consumer trend of the people and the lending policy of the bank in each period, consumer loans to serve contemporary living needs. accounted for a larger proportion. Borrow money to buy real estate,Housing construction requires borrowers to bear high costs in a long time, moreover, the consumer lending policy of banks for this type is quite strict, because this type of loan contains risks. unpredictable.
However, this situation is gradually changing. The outstanding balance of medium and long-term loans accounted for a larger proportion. This is illustrated in Figure 2.4 .
Previously, CN often prioritized financing for short-term consumer loan needs. It is very difficult for customers to access the bank's medium and long-term capital. But now, before the fierce competition of the banking market, plus the positive change in the real estate market, the demand for loans to buy real estate and build houses is increasing day by day. Banks have to adjust lending policies to be able to meet that growing demand. NH increased medium and long-term lending for consumer loans, making medium and long-term loans grow at a higher rate than short-term loans. Specifically, the growth rate of outstanding loans of short-term loans in the period 2005-2006 reached 79.7%, in the 2006-2007 period, it increased only 15.2%. Meanwhile, the growth rate of medium-term loans was 89.6% in the 2005-2006 period, 61% in the 2006-2007 period,long-term: 220% growth in 2005-2006, 135% in 2006. As a result, the proportion of medium and long-term loans had a very strong breakthrough, while the proportion of loans Short-term loans only kept at a stable growth rate. It shows that CN is focusing on meeting the medium and long-term borrowing needs of consumers, contributing to improving the quality of the CN's credit portfolio.
*Proportion of consumer loans in total outstanding loans of the branch
Over £ 2.2 ho sir t e o ng credit emplacements ng , can be found lending structure of the branch are shift, outstanding Acts not only continued growth but its share in total loans CN also increased gradually. Year
In 2005, credit card outstanding loans accounted for only 0.94%, in 2006 accounted for 2.1% and in 2007, this rate reached 2.7%. An increase in the proportion of outstanding loans of credit unions means a decrease in the proportion of outstanding loans of business loans. Because, in recent years, the banking market has been fiercely competitive, the credit card market was previously overlooked, gradually becoming a business expansion target for banks. Banks are forced to improve the quality of credit cards to attract customers. Moreover, when the savings interest rate race begins, it means an increase in interest rates, especially in the field of business loans, because business loans in banks always account for a large proportion. Businesses have to bear higher capital costs, so the need for business loans also decreases. The increase in the proportion of outstanding loans shows that the branch is gradually improving the quality of loans for people's consumption needs.through which the number of consumer loans to the branch is increasing day by day.
Of course, business loans are always a great income-generating activity for banks. However, if compared with the outstanding balance of business loans, the outstanding balance of credit CV is still too small. The following figure 2.5 shows this clearly.
In terms of outstanding loans, business loans still account for an overwhelming proportion of credit loans. The main reason is that business lending is still the main activity of the branch. Business lending is the most profitable business for the branch, moreover, this business also has many advantages such as: being the branch's traditional strength, advantages in terms of scale, interest rate compared to other branches. CVTD. Meanwhile, credit card has a large cost, the management faces many difficulties due to the large number of consumer loans, moreover, the credit card business is only in the early stages of exploitation. Therefore, the proportion of credit card outstanding loans, although increased, is still not significant. The target for this proportion to be greater than 5% has not been achieved yet. That shows that the customer policy of CN is still not interested in the field of credit card, making it not really effective to improve the quality of loans for this object.
*Branch's consumer loan sales
Table 2.5 Loan turnover of branches
Unit: billion dong
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(Source: Consumer loan data from Personal Banking Department 2005-2007)
A marked increase in credit card sales, along with a decrease in business loan sales, shows that the branch has achieved certain results in improving the quality of credit records.
Also based on the above data table, we can see that CVTD sales tend to increase. In 2005, credit card sales reached 63.2 billion, in 2006 it increased by 127.5 percent to 143.8 billion and in 2007 it increased by 29.4% to 186 billion. The increase in credit card sales in both relative and absolute terms proves that the quality of credit cards is being significantly improved, so that the branch's operations are more in line with the general development trend of the economy.
Through the above analysis, it can be concluded that the credit report quality of the branch is being improved, reflected in the growth of loan balance, change in loan structure, increase in loan sales... oil
Therefore, in terms of the proportion of outstanding loans, there is still too large a gap between credit cards and business loans. This reality is slowly changing, but that change is happening too slowly. In summary, activities to improve the quality of credit records of the branch have achieved some initial results, but there are still many limitations due to different reasons. All of these issues will be explored in more detail in the following sections.
2.3 Assessment of consumer lending situation of Ba Dinh branch of Industry and Trade Bank
2.3.1 Achievements of branches in consumer lending
Since 2002, the branch has started to improve the quality of CVTD. The contents of consumer lending operations have been agreed in the entire system of Industry and Trade Bank according to Decision No. 049/QD-NHCT-HĐQT dated May 31, 2002. Since then, with the position of the flagship in the system
Industry and Trade Bank, branch has achieved outstanding achievements.
- In terms of outstanding loans and credit sales: in the past three years, both of these indicators have increased at a high rate. Specifically, outstanding loans grew at an average rate of 65%/year, reaching VND 70.4 billion in 2007. Loan sales grew even faster, an average of 78%/year, reaching VND 186 billion in 2007. copper. The strong development of consumer demand has led to an increase in the demand for loans of this economic sector, both in terms of the number and size of loans. Therefore, the Branch must improve the quality of loans, rapidly increase loan sales and outstanding loans to meet market trends.
- Regarding the proportion of loan sales and outstanding loans: over the past three years, the proportion of loan sales and outstanding loans has tended to increase. In 2005, credit card outstanding loans accounted for 0.94%, in 2006 accounted for 2.1% and in 2007, this ratio reached 2.7%. This positive change shows the branch's great determination in improving the quality of CVTD.
- Regarding credit balance structure: short-term, medium-term and long-term loans all have growth. Branches focus on lending short-term loans because the ability to recover capital of short-term loans is greater than that of medium-term ones, with higher safety. However, medium and long-term loans are growing faster and their share in total outstanding loans is also increasing gradually. In 2005, medium and long-term loans accounted for 34.8% of total outstanding loans, 38.6% in 2006 and 49.4% in 2007. This fact proves that the branch is improving the quality of medium and long-term loans to meet the increasing capital needs of consumers.
Immersed in the general trend of commercial banks today is to improve the quality of credit documents, thereby increasing competitiveness in the market, the branch has also achieved certain results in this activity. However, these results are still not commensurate with the potential and position of the branch. Credit card activities of the branch still have many limitations that need to be overcome.
2.3.2 Limitations and reasons for branch consumer lending
First of all, the proportion of outstanding loans is still very small compared to the proportion of business loans. Credit card balance accounts for just over 2.5% of the branch's total outstanding loans. The target for this proportion to be greater than or equal to 5% has not been achieved.
Moreover, when borrowing at a branch, consumer loans are still subject to discrimination in terms of interest rates, terms and sizes of loans compared to business loans.
The branch is still very cautious when it comes to providing medium and long-term credit for consumer loans, especially for real estate purchases. The proportion of medium and long-term loans in total outstanding loans has only reached an average of 37%. Therefore, the demand for medium and long-term loans of consumer loans cannot be fully met by the branch.
The limitations in credit card activities of the branch still clearly exist. To overcome this situation, it is necessary to find out the causes of the above limitations.
* On the branch side:
The first reason is that the branch's credit policy is not very flexible. Business lending is the traditional strength of the branch, the profit from business lending accounts for a very large proportion.
Credit policy is built in the direction of prioritizing this customer.
Meanwhile, customers with consumer loans face more difficulties when borrowing at branches. Compared to business loans, consumer loan requests are more difficult to get approved. If being borrowed, the consumer loan interest rate is higher, the term is shorter, the re-lending limit is lower… The conditions for collateral are also stricter. Credit CVs that are not secured by assets are almost exclusively borrowed by salary books. The procedure for valuing the branch's collateral is quite cumbersome. The loan-to-value ratio is not high, only 20-50%. The branch's customer policy is still not open and has not attracted a large number of consumer loan customers to the branch.
The branch's marketing on credit card has not been paid attention.
The product policy has not made the branch's products stand out compared to the products of other commercial banks. The branch actively searched for new customers, learned about reality to offer new high-quality products and services to satisfy customers' needs, but this important activity has not been paid enough attention. The marketing policy of the branch has only been built in general, not towards each specific customer. The promotion of the brand and image, although existing, has not been properly invested, so the effect is not high. Therefore, efforts in improving the quality of credit records of the branch have not achieved the expected results.
The lending process that the branch is applying for credit loans is not flexible. This is also the cause of limitations in CVTD activities. The strict lending conditions, complicated and time consuming procedures make it difficult for many customers to borrow consumer loans, despite having good financial status and income, and a viable loan option to access credit from the bank. branch. Still knowing that the credit card industry contains a lot of risks, but the branch is still too strict in determining collateral and procedures to avoid risks, that rigor has made many customers unable to borrow money. get capital.
Another subjective reason that cannot be ignored is the branch's size and capital structure. Hanoi in general and Ba Dinh District in particular are home to many commercial banks. Therefore, the competition in raising capital is also very fierce, making it difficult for the branch to raise capital. The deposit interest rate offered by the branch is lower than that of other joint stock commercial banks, the mobilization methods are not attractive, so the capital size of the branch has not increased strongly. On the other hand, the branch's mobilization source is mainly short-term. In order to ensure liquidity and maturity, the branch could not meet CVTD's medium and long-term capital needs. Therefore, activities to improve the quality of credit records of the branch are still restrained.