Debts with restructured repayment terms for the first time, except for debts with restructured repayment terms for the first time classified in group 2 above.
Debts are exempted or have interest reduced due to the customer's inability to pay in full.
under the credit agreement.
Group 4 (Doubtful debt)
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Customers with overdue debts from 181 to 360 days
Bad debts with restructured repayment terms for the first time are overdue less than 90 days according to the first restructured repayment term.
Debts with a second restructuring of repayment terms.
Group 5 (Debt with potential loss of capital)
Customers in debt for more than 360 days
Bad debts with restructured repayment terms for the first time are overdue for 90 days or more according to the first restructured repayment term.
Debts with a second restructuring of repayment terms are overdue according to the second restructuring of repayment terms.
Debts that have been restructured for the third time or more (including those that have not been restructured yet)
overdue or expired).
Debts frozen and debts pending settlement.
For these bad debts, commercial banks need to set aside a certain percentage of provisions, which reduces profits due to an additional credit cost. Looking at bad debts can also assess the management ability and credit efficiency of each commercial bank. Therefore, maintaining a low bad debt ratio is always a task that any institution operating in the monetary business sector is interested in.
The bad debt ratio for individual customers is calculated as follows:
Bad debt is the most important measure to assess the health of the institution. It affects all business activities of the bank. Because if bad debt increases, the possibility of capital loss also increases, affecting the cash flow, thereby increasing the actual cost of capital recovery, opportunity cost, borrowing cost and liquidity compensation cost.
Bad debt ratio of KHCN group (%) = Total outstanding loans for KHCN
Bad debt of science and technology group
This indicator shows what percentage of the current outstanding balance of personal loans is bad debt. The higher the bad debt ratio, the more difficult it is for commercial banks to recover capital, affecting lending efficiency and vice versa.
In addition, it is possible to consider the ratio of bad debt to personal loans to the total bad debt of commercial banks. Thereby, it is possible to identify what percentage of bad debt from personal credit activities accounts for in the total bad debt of commercial banks. Thanks to that, commercial banks can detect which lending activities have many difficulties in debt collection and the reasons for this, in order to focus on providing appropriate solutions.
b. Capital turnover ratio
Science and Technology credit capital turnover = Average outstanding balance of science and technology loans
KHCN debt collection turnover
The above indicator reflects the ratio between debt collection turnover and outstanding loans, measuring the speed of credit capital turnover. Thereby, it is possible to see the ability to expand lending and the effectiveness of debt collection of commercial banks. The larger the credit capital turnover, the more effective the capital is put into the business activities of commercial banks, the more favorable the debt collection work, the scale of lending will be expanded and most of the loans due in the year will be fully recovered. On the contrary, if the ratio is lower, it shows that both lending and debt collection are facing difficulties, or it may be because the credit policy of commercial banks is leaning towards medium and long-term lending.
c. Average debt collection period
Average collection period =
Average outstanding balance
Debt collection turnover
x 365 (days)
This is an indicator that reflects the speed of debt collection in terms of time. The smaller this indicator is, the faster the debt collection time and the capital turnover speed of the bank are. The loan capital is used effectively. However, if compared with businesses in the same industry, this indicator is still too low, the business may lose customers because customers will repay the bank and switch to borrowing from competing credit institutions with lower interest rates, providing a longer capital usage period. And so the bank will have reduced sales. On the contrary, when comparing this indicator over the years and seeing an increase, it is very likely that the bank is having difficulty collecting debt from customers and it may also be a sign that the outstanding debt has exceeded the limit while debt collection is still facing many difficulties.
d. Debt collection ratio
KHCN debt collection ratio = KHCN loan turnover
KHCN debt collection turnover
This indicator reflects the efficiency of debt collection of commercial banks, it reflects how much capital the bank will collect with the corresponding loan turnover in a certain period. If this indicator is high, it shows that debt collection is favorable, debt is fully recovered, reflecting that the bank's loans are effective, the customer's ability to repay is stable, and the bank's risk will be reduced. On the contrary, if this indicator is low, it will show the difficulty and inefficiency in debt collection. However, it is also possible that the credit policy of commercial banks is leaning towards medium and long-term loans.
1.4.2.2.4. Profitability indicators group
Profit = Total Income – Total Cost
Profit is a goal that any economic organization aims for. Commercial banks, as an intermediary in transferring capital to the economy, also aim for profit like any other business, the purpose is to be able to survive and develop their operations. Commercial banks' profits are created on the basis of credit balance, interest rates and time. Therefore, banks must calculate to achieve the highest profit and reduce costs and risks to the lowest level, and must compare the profits earned with the risks that credit activities bring. That is why in evaluating the effectiveness of personal credit activities of banks, we need to analyze the profits brought by this activity.
At the same time, to properly evaluate the effective growth of personal credit over time, people often use the profit growth rate, which clearly reflects market fluctuations as well as accurately evaluates personal customer credit activities, and at the same time shows whether the credit policies applied by banks over time are appropriate or not.
LN growth rate =
This year's profit - Last year's profit
Last year's profit
× 100%
1.3.3. Factors affecting personal lending activities of commercial banks.
1.3.3.1. Factors related to the bank
Bank capital
A bank that wants to do business must have capital. The bank's capital is its own capital and mobilized capital.
Commercial banks are affected by monetary policy, influenced by the central bank and comply with banking laws. Commercial banks are only allowed to mobilize capital 20 times their equity capital, meaning that the larger the equity capital, the higher the capital mobilization capacity and the easier it is for the bank to carry out its production and business activities. Furthermore, to reach more customers, banks must have capital to pay.
for expanding more branches, transaction offices, recruiting more staff, increasing expenses
advertising costs, technology modernization...
Banks lend mainly from their mobilized capital. Therefore, the larger the bank's capital, the more it lends to customers, which means that the bank's business activities are increasingly strengthened and expanded. If there is little capital, the bank will not be able to meet the needs of a large number of customers, miss investment opportunities, profits will not be high and the increase in lending activities will be limited. On the contrary, if the bank mobilizes a large amount of capital but the amount of loans is small, it will lead to the phenomenon of capital stagnation, this amount of capital stagnation does not generate profit and the interest rate to be paid will reduce the bank's profit. Therefore, the amount of capital must correspond to the amount of loans or a small difference. Researching the capital mobilization situation of the bank is important when wanting to increase customer lending activities.
Credit policy
Credit policy is the factor that customers are most concerned about. Credit policy includes factors such as loan limit for a customer, loan term, loan interest rate and loan fee, handling method or solution when customers borrow beyond the limit... All of these factors have a direct impact on the expansion of the bank's lending activities. If these factors are correct, reasonable, legal and suitable, meeting the diverse needs of customers, the bank will be successful in lending. On the contrary, if the above factors are rigid, illegal, unreasonable and not in accordance with the actual situation, the expansion of lending may fail.
Customer information
Contributing to the success of lending activities is customer information. In conditions of increasingly fierce competition, customer information is very important, because banks lend to customers based on their personal information. The accuracy of trust depends on the quality of information that banks provide.
information has become essential to all businesses in general.
and commercial banks in particular.
To increase lending activities, banks must pay attention to both internal and external factors (external factors include: customers, politics, culture, law, changes in the economic environment, competitors, etc.). Information requirements must be complete, accurate and timely. In fact, in Vietnam, collecting information to meet the above requirements is difficult and has many limitations.
Human resources
For every business, human resources are the decisive factor in the success or failure of business operations, and so is the bank. The quality of human resources is increasingly required, selecting skilled personnel will help the bank save time and costs in evaluating the business performance of the project, evaluating collateral, employees with analytical skills... and selecting ethical employees can prevent possible violations in professional credit operations.
Employees are also an important factor affecting customer lending. Employees with good attitudes will help customers feel more satisfied and want to use the bank's services. Competent employees will help the bank find more customers, increasing the bank's profits. On the contrary, if the employee's attitude is bad or the employee is not competent, the number of customers will decrease or not increase, and profits will decrease.
1.3.3.2. External factors
Customers
The customer is the person who has a direct relationship with the bank's operations. If the customer has the ability to pay, the loan will be more guaranteed than a customer with low ability to pay. Moreover, the customer's moral character is also very important because in many cases, they want to appropriate the loan capital, not repay the loan, despite having the ability to pay and this has caused the bank to face many risks.
Economic environment
Each historical period and economic event affects the operations of the bank, such as inflation, recession or economic growth, tax policies, and exchange rate changes, all of which affect the business operations of the bank (including credit operations). If the economy is stable, inflation is low, and there is no crisis, then the production and business operations of customers will be better and they will be able to repay both principal and interest on time, so the credit operations of the bank will develop and credit efficiency will be improved. On the contrary, in a recessionary economy with high inflation, business operations will be narrowed, investment and consumption will decrease, leading to a decrease in credit demand, and the credit capital that has been implemented will be difficult to use effectively and the debt will be paid off on time, making the credit operations of the bank ineffective, decreasing in scale and quality.
Law
Every time the law changes, it has a strong impact on the production and business activities of economic entities. Therefore, these impacts also affect the business activities of banks. Credit contracts are signed before or after the legal document is issued and takes effect. If the contracts signed before the legal document is issued have contents that are contrary to that legal document, it is easy to take risks. On the other hand, businesses that are governed by the contractual acts they have signed will have many difficulties in their business, leading to the inability to repay debts to the bank.
Natural environment
In addition, the natural environment also affects banking activities in general and credit activities in particular. For example, droughts, floods, epidemics, etc. make production and business activities of customers difficult, affecting their ability to repay debts.
CONCLUSION OF CHAPTER 1
Chapter 1 of the thesis mentioned some general theories about science and technology, from the concept, characteristics, role and capital needs of customers. Besides, it also mentioned the indicators to evaluate the efficiency of science and technology lending. It can be seen that science and technology lending activities play an important role in the economy. Improving the efficiency of lending activities to individual customers is increasingly focused and has important significance for commercial banks.