Indicators for Evaluating the Efficiency of Consumer Lending Activities of NHTM:

Due to the long loan term, market interest rates can fluctuate greatly throughout the loan period. If a fixed interest rate is applied throughout the loan term, when market interest rates increase, the bank may be at risk of lending at too low an interest rate. Conversely, if market interest rates decrease, bank loans with higher interest rates will no longer be attractive to borrowers, affecting the competitiveness of banks.

1.2.6.2 Exchange rate risk:

In case the loan is made in foreign currency, banks may face risks when the exchange rate changes or the borrower will have difficulty in repaying the principal and interest in case the exchange rate changes while the borrower's income is in domestic currency.

1.2.6.3 Credit risk:

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The source of finance to pay for consumer loans is not based on profits or derived from the loans themselves, but it depends on another source that is completely independent of the loan source, which is the borrower's future income. Therefore, it will include both objective and subjective risks.

In life, we cannot foresee all the consequences due to objective risks such as economic recession, crop failure, natural disasters, etc. In particular, consumer lending activities depend on the economic cycle, especially when the economy falls into recession, leading to the risk of unemployment and reduced income, affecting the borrower's ability to repay debts.

In addition, there are also some risks arising from the borrower himself such as:

- Risk of borrower's inability to pay: Because consumer loans have long terms, the ability to repay depends largely on the health, family and work of the borrower. The risks that may occur in this case include:

 The borrower dies or has an accident that results in loss of ability to work and is completely unable to pay the remaining debt to the bank;

 Borrower has an accident, reduced ability to work or changes job position

leading to a decrease in income and failure to fully fulfill debt repayment obligations.

- Risk of customer fraud : Because consumer loan customers are individuals, banks have a lot of difficulty in capturing customer information. Taking advantage of this, customers can intentionally commit fraud to appropriate loan money, leading to the risk of not being able to recover capital for the bank.

1.3 Indicators for evaluating the effectiveness of consumer lending activities of commercial banks:

1.3.1 Loan turnover:

This is an indicator that reflects all the credits that the bank has issued for lending during a certain period of time, regardless of whether the loan has been recovered or not. Loan turnover is usually determined by month, quarter, or year.

1.3.2 Debt collection turnover:

Is the total amount that the bank has recovered from previous loans during the

a certain period

1.3.3 Outstanding debt:

This is an indicator that reflects how much the bank currently has to lend at a certain point in time, and this is also the amount that the bank needs to collect.

1.3.4 Overdue debt and overdue debt ratio:

1.3.4.1 Overdue debt:

Is all or part of the principal debt overdue regardless of the reason or overdue debt is credit that is not repaid on time according to the following levels:

- Debts overdue from 10 days to 90 days (Group 2 debt - debt requiring attention).

- Debts overdue from 91 days to 180 days (Group 3 debt - substandard debt).

- Debts overdue from 181 days to 360 days (Group 4 debt - doubtful debt)

doubt).

- Debts overdue for more than 360 days (Group 5 debt - debt with potential loss of capital).

1.3.4.2 Overdue debt ratio:

Debt ratio

limit

Overdue debt

= x 100%

Total outstanding debt

In which: Total outstanding debt includes:

- Loans, advances, overdrafts, financial leases.

- Discount, rediscount of valuable documents

- Factoring, other forms of credit.

A delinquency rate of < 5% is considered normal.

A delinquency rate of 5% to <10% is considered abnormal. A delinquency rate of 10% to <15% is considered high.

Overdue debt ratio from 15% to 20% is considered too high, risk of crisis

very big

1.3.5 Bad debt and bad debt ratio:

1.3.5.1 Bad debt:

Bad debt is a serious overdue debt that needs to be closely monitored and managed. Bad debt is debt in groups 3 to 5 (according to Circular 02/2013/TT-NHNN dated January 21, 2013 of the State Bank), specifically as follows:

- Substandard debt group (Group 3 debt): Includes debt overdue from 91 days to 180 days, debt extended for the first time and debt with interest exemption or reduction due to the customer's inability to pay full interest according to the credit contract. In addition, there are the following cases:

 Debt of customers or guarantors being organizations or individuals that credit institutions and foreign bank branches are not allowed to grant credit to according to regulations.

 Debt secured by shares of the credit institution itself or a subsidiary of the credit institution or the loan is used to contribute capital to another credit institution on the basis that the lending credit institution receives collateral by shares of the credit institution receiving the capital contribution.

 Unsecured debt granted with preferential conditions or a value exceeding 5% of the equity capital of a credit institution or foreign bank branch when granted to customers subject to credit restrictions as prescribed.

 Debt granted to subsidiaries, affiliated companies of credit institutions or enterprises in which the credit institution holds control has a value exceeding the prescribed limit ratios.

 Debt with value exceeding credit limit, except in cases where it is allowed to exceed

limited, as prescribed by law.

 Debts violating the provisions of law on credit granting, foreign exchange management and safety ratios with credit institutions and foreign bank branches.

 Debts violating internal regulations on credit granting, loan management, risk provisioning policies of credit institutions and foreign bank branches.

 Debt is being recovered according to inspection conclusion.

- Doubtful debt group (Group 4 debt): Includes debts overdue from 181 days to 360 days; debts with restructured repayment terms for the first time overdue less than 90 days according to the first restructured repayment term; Debts with restructured repayment terms for the second time; Debts that must be recovered according to inspection conclusions but have been overdue for up to 60 days and have not yet been recovered...

- Group of debts with the possibility of losing capital (Group 5 debt): Including debts overdue for more than 360 days, debts with restructured repayment terms for the first time overdue for 90 days or more according to the first restructured repayment term; debts with restructured repayment terms for the second time overdue according to the second restructured repayment term; debts with restructured repayment terms for the third time or more, including those that are not overdue or are overdue.

1.3.5.2 Bad debt ratio:

According to Circular 02/2013/TT-NHNN, “ Bad debt ratio is the ratio between bad debt and total outstanding debt from group 1 to group 5”. This ratio shows the level of danger that commercial banks must face and must have resolute handling measures.

1.3.6 Debt collection ratio:

Debt collection ratio =

CVTD debt collection turnover

CVTD Sales

x 100%

This indicator is also known as debt recovery ratio, showing the relationship between consumer loan sales and CVTD debt collection sales. It reflects how much debt the bank will collect from one dong of loan capital in a certain period. The larger this indicator is, the better and vice versa.

1.3.7 Consumer credit turnover:

Credit capital turnover

consumption

In there:

Average CVTD outstanding balance

CVTD debt collection turnover

Average CVTD outstanding balance

(Balanced debt of CVTD at the beginning of the period + Balanced debt of CVTD at the end of the period)

in period 2

Credit turnover measures the speed of credit capital circulation of the bank, it shows the time to collect CVTD debts quickly or slowly, thereby evaluating the efficiency of the bank's consumer lending activities.

CHAPTER II:

CURRENT STATUS OF CONSUMER LENDING ACTIVITIES AT AGRICULTURAL AND DEVELOPMENT BANK BRANCH

RURAL AREA OF DIEN DISTRICT, KHANH HOA

2.1 Overview of the Bank for Agriculture and Rural Development Branch

Dien Khanh district, Khanh Hoa:

2.1.1 History of formation and development:

The Bank for Agriculture and Rural Development of Dien Khanh District, Khanh Hoa Branch (Bank for Agriculture and Rural Development of Dien Khanh District, Khanh Hoa) is a type III bank under the Bank for Agriculture and Rural Development of Khanh Hoa Province, headquartered at 228 Lac Long Quan, Dien Khanh Town, Dien Khanh District, Khanh Hoa.

According to Decree 53/HDBT dated March 26, 1988 of the Council of Ministers on the establishment of specialized banks including the Vietnam Agricultural Development Bank, and in 1990 changed its name to the Vietnam Agricultural Bank.

In November 1990, the branch was named after the Vietnam Bank for Agriculture and was called Dien Khanh Agricultural Bank Branch. In 1996, according to development requirements, the Vietnam Bank for Agriculture and Rural Development changed its name to the Vietnam Bank for Agriculture and Rural Development to serve more customers and more fields. Accordingly, in October 1998, Dien Khanh Agricultural Bank Branch also changed its name to Dien Khanh District Agricultural Bank and Rural Development. By August 2013, the official name was Dien Khanh Khanh District Agricultural Bank and Rural Development Branch (Agribank Dien Khanh Khanh Hoa Branch).

As a commercial bank located in an area with many difficulties in terms of facilities, few business advantages, and a purely agricultural district that depends heavily on natural conditions, where people's lives are still poor, Dien Khanh Khanh District Agricultural and Rural Development Bank

Hoa has encountered many difficulties due to the cumbersome apparatus and staff who are still familiar with the subsidy period. In the early stages, the branch's investment mainly focused on state-owned enterprises and agricultural cooperatives while these units have not fully adapted to the market economy, the products produced are not highly competitive, many enterprises have stopped operating and dissolved, causing the bank's debt collection ability to be more or less affected. From that reality, the bank has changed its direction to serve the development needs of small and medium-sized non-state enterprises, production and business households and staff in the district. With continuous efforts, from 2010 to present, the branch of the Bank for Agriculture and Rural Development of Dien Khanh district, Khanh Hoa has achieved certain results in capital growth:

In 2011, mobilized capital was 477,118 million VND. In 2012, mobilized capital was 629,350 million VND.

In 2013, mobilized capital reached 750,413 million VND.

The Dien Khanh Khanh Hoa branch of the Bank for Agriculture and Rural Development has developed a network of transaction offices to serve residential customers, especially farmers in remote areas, to facilitate capital mobilization and create conditions for people to access banks more easily.

The Dien Khanh Khanh Hoa Branch of the Bank for Agriculture and Rural Development always constantly innovates and improves its transaction style, improves the quality of customer service, renews equipment, applies new science and technology to its work, and enhances the bank's reputation. In addition, to increase the bank's competitiveness, the branch also increases advertising, marketing, and marketing information to customers who are businesses and individuals with financial capacity, strengthens the trust of old customers, seeks new customers for loans, and develops banking services.

Thanks to proactive capital sources and support from superior banks, the branch has promptly met all customers' loan needs, with outstanding loans growing over the years as follows:

In 2011, outstanding debt was 241,566 million VND.

In 2012, outstanding debt was 243,944 million VND.

By 2013, outstanding debt had increased to VND 255,589 million.

In general, on the path of construction and development, the branch has achieved important victories, such as a significant increase in mobilized capital, increasing year after year, effective credit investment, and diversification of business activities. This is a long step on the development path of the branch during the period of the country's integration into the world economy.

2.1.2 Functions, tasks and organizational structure of the Branch of the Bank for Agriculture and Rural Development, Dien Khanh District, Khanh Hoa:

2.1.2.1 Functions and tasks of the Branch of the Bank for Agriculture and Rural Development of Dien Khanh District, Khanh Hoa:

Function:

- Mobilizing short-term, medium-term and long-term capital from all economic sectors and residents in the form of demand and term deposits in Vietnamese currency and foreign currency.

- Receive and implement programs and projects from funding sources, entrusted capital and investments from domestic and foreign organizations.

- Short-term, medium-term and long-term loans for all businesses and residents of all economic sectors in the locality to meet capital needs for production, business, services and life.

- Discounting of commercial papers, bonds and valuable papers.

- Provide payment services between customers.

- Mobilize capital sources from abroad and provide other banking services when permitted by the State Bank.

Mission:

- Capital mobilization organization: Exploiting and mobilizing capital in many forms, diversifying capital mobilization products, organizing savings agents in remote areas in the district.

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