customers from the State Bank's Credit Information Center (CIC), but up to now this activity has not been carried out regularly and effectively.
Information technology applications of the NHPT in general and the Bac Giang NHPT in particular are at the lowest level in the system of financial and banking organizations nationwide. Project management and customer management activities have not been computerized but are performed manually. The connection quality of the system of these applications is very low, the transmission speed is slow, often disconnected, not ensuring the exchange of information between branches and between branches with HSC or with other banks. This leads to limited credit risk prevention work, the NHPT does not have a credit risk warning system to have appropriate credit risk prevention measures. The credit limit and restriction system has not been researched and established in accordance with the specific characteristics of its operations. (by industry, customer, customer group, etc.)
The debt classification system is not suitable, does not cover all the debt recovery ability and risk of the loan. Due attention is not paid to assessing the customer's capacity in debt classification and loan. Good debt management and bad debt management are not separated. Risk handling is not separated from credit management. Monitoring, management and re-evaluation of loan collateral are not close. Analysis and handling of loan collateral for bad debts are not specifically regulated.
*Causes from the environment of sports activities:
-Economic environment:
Since 2012, the Government has implemented a tight monetary policy to control inflation and has always put this goal first. The consumer price index has decreased to single digits, but this has been accompanied by consequences such as low credit growth and declining social investment capital. According to some economic experts, low inflation in recent times is mainly due to exhausted demand, and the risk of price increases is always present.
existing. In the context of tightening public investment, VDB stipulates that the authority to decide on granting credit for investment loan projects belongs to HSC instead of decentralizing it to Branch Directors as in the period before 2012. This shows that the impact of the economic environment has significantly narrowed the expansion of investment activities.
In addition, due to the severe impact of the Covid-19 pandemic continuously in the 3 years of 2019-2021, the domestic and foreign economies have slowed down, significantly affecting the production and business situation of enterprises as well as the ability to recover capital of VDB Bac Giang.
- Legal environment:
The legal environment with the State's mechanisms and policies on e-commerce activities has a significant impact on the development of e-commerce activities of the VDB in general and the Bac Giang VDB in particular. The State's mechanisms and policies are unstable and constantly changing, making it difficult for the Bac Giang VDB to be proactive in implementing e-commerce policies and maintain regular relationships with customers, thereby reducing the reputation with customers as well as the role of VDB Bac Giang in the local economy.
At the same time, the Government's regulations on lending for investment projects also cause many difficulties for the Bac Giang Branch of the NHPT. Typically, lending under the direction of the project, these programs often bring higher social efficiency than economic efficiency. The source of debt repayment is from the local budget, making it difficult for VDB Bac Giang to recover debt whenever the provincial budget does not allocate enough capital to repay the debt.
The Government has not clearly defined the role and long-term development orientation for the State's credit activities; the organizational model based on the inheritance of regulations applied to the Credit Support Fund is no longer suitable for the current period; a mechanism has not been established to force the Vietnam Development Bank to be autonomous and self-responsible.
In operation, VDB's operations are less flexible than other credit institutions and financial institutions, and legal risks are high.
The implementation environment still contains many unfavorable factors such as the market has many unstable factors: interest rates, exchange rates, prices, etc. fluctuate strongly in a continuous upward direction, many projects find it difficult to mobilize more capital for investment.
Policies and laws related to credit activities are still inadequate, not really scientific and consistent. The issuance of guidelines is still slow in implementation, there are many shortcomings and overlaps, causing difficulties for the Branch in granting credit and handling risks:
+ The State's investment credit policy has significantly narrowed the lending subjects as well as preferential conditions, limiting the role of VDB in providing investment capital for the economy, leading to many types of projects previously funded by VDB having to switch to using other capital sources to "lend" to many projects according to the Government's regulations, causing difficulties for VDB in general and VDB Bac Giang in particular. Along with that, the regulations on lending/disbursement conditions in Decree 32/2017/ND-CP are not really reasonable, causing difficulties for VDB if it implements lending according to this Decree.
+ The policy on risk handling in the State's investment and credit activities prescribed by the Government in the past still has many limitations. Most of the risk handling measures are decided by the Ministry of Finance and the Government, VDB is only limited to deciding to adjust the repayment period, extend the debt for projects/loans. Current regulations on loan guarantees, risk prevention and risk handling, and unreasonable accounting regimes are continuing to increase the risks of liquidity, credit and financial risks.
-Causes from the business side:
The capacity of enterprises is not high, technical and management levels are still limited, enterprises cannot control cash flow, business operations are at a loss leading to insolvency and inability to repay debts.
The autonomy of enterprises is not high, a large number of enterprises still believe that the State's investment credit capital is a subsidy. Some investors, even local authorities, deliberately delay paying their loans, causing overdue debt (principal + interest) to persist for a long time, increasing the risk of credit risks.
CHAPTER 3: SOME SOLUTIONS TO DEVELOP INVESTMENT CREDIT ACTIVITIES AT VIETNAM DEVELOPMENT BANK - BAC GIANG BRANCH
3.1. Development orientation of investment credit activities of the State Bank
3.1.1. Development goals of investment credit activities of the State Bank
Pursuant to Decision No. 369/2013/QD-TTg dated February 28, 2013 on approving the development strategy of the Vietnam Development Bank to 2020 and vision to 2030 and the Project on restructuring associated with bad debt settlement in 2019-2021 according to Decision No. 48/QD-TTg dated July 31, 2019 of the Prime Minister, the VDB has basically completed a number of specific goals such as: maintaining the stability of the system, synchronously implementing all aspects of operations; focusing resources so that the Action Program to implement Project 48 is implemented according to the roadmap, resolutely implementing and completing a step of rearranging, restructuring the organizational apparatus and streamlining the payroll; proactively coordinating with the Central Ministries and branches in building and perfecting policies and mechanisms, building and perfecting a synchronous system of internal management documents. Therefore, the next goals and directions for developing Investment Credit activities after 2020 and vision to 2030 of the NHPT are as follows:
General objectives:
Continue to consolidate and develop the Vietnam Development Bank as a non-profit policy bank of the Government in a sustainable and effective manner, ensuring sufficient capacity to implement the State's investment credit and export credit policies and other tasks assigned by the Government and the Prime Minister, contributing to the implementation of the country's socio-economic development strategies and plans in each period.
Specific objectives:
Continue to implement the VDB Development Strategy with a vision to 2030 and the Restructuring Project associated with VDB's bad debt settlement in the period of 2019-2021, ensuring the quality of credit growth. Overcome existing shortcomings and weaknesses, gradually make VDB's credit activities safer and more sustainable, in line with market principles and socio-economic development goals, specifically:
STT
Target | Goals and vision to 2030 | |
1 | Credit growth rate average (%/year) | In line with socio-economic development requirements |
2 | Asset size (billion VND) | In line with socio-economic development requirements |
3 | Charter capital (billion VND) | > 30,000 |
4 | Ratio of charter capital/total surplus debt of investment credit and export credit (%) | Suitable for the scale of operations of the Vietnam Development Bank |
5 | Capital Adequacy Ratio (%) | “According to international standards” |
6 | Bad debt ratio/total outstanding debt (%) | ≤3 |
7 | Interest rate differential compensation mechanism interest and management fees from the State budget | Remove |
8 | Financial autonomy (%) | 100 |
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3.1.2. Development orientation of investment credit activities of the State Bank
-Vietnam Development Bank focuses on State development investment credit activities decided by the Government and Prime Minister in each period.
+ Focusing credit capital on investment in the fields of socio-economic infrastructure; supporting industries; rural agriculture; socialization in the fields of education, healthcare, environmental protection and green technology; clean energy and renewable energy.
- Focus on ODA loan capital for re-lending from the Government through the Vietnam Development Bank; encourage local financial funds (such as local development investment funds, credit guarantee funds) to make entrusted investments through the Bank according to local development goals.
- Research to allow the implementation of self-compensated loan agreements for subjects having borrowing relationships at the Vietnam Development Bank in order to improve the efficiency of capital use and create conditions for the Vietnam Development Bank to gradually ensure financial autonomy and limit state budget subsidies. The loan agreement must ensure the principle of balancing mobilized capital for lending and not affect the implementation of the State's investment credit tasks assigned annually and ensure efficiency and capital recovery.
- Determine the relationship between equity and total outstanding loans of state investment credit. On that basis, develop a suitable roadmap to increase the bank's charter capital.
- Implement the interest rate mechanism for investment credit and export credit loans according to the non-profit principle, but must ensure adequate compensation for capital costs, operating costs and increase risk provisions in credit activities of the Vietnam Development Bank.
- Apply a debt classification mechanism suitable to the specific operations of the Vietnam Development Bank, including studying the exclusion of debts of a Government nature or guaranteed by the Government; increase credit risk provisions and apply a risk handling mechanism suitable to the specific operations.
Accordingly, research to promulgate risk handling regulations in the direction of increasing decentralization for the Vietnam Development Bank to handle risks according to the provisions of law (according to the Charter of organization, operation and financial mechanism for the Vietnam Development Bank decided by the Prime Minister).
-Research to regulate and apply financial safety indicators according to the model of credit institutions, ensuring principles according to international practices.
-Research and develop separate laws applicable to policy banks, including the Vietnam Development Bank; in the immediate future, the Vietnam Development Bank shall comply with both the State Budget Law and the Law on Credit Institutions:
+ Regarding the State Budget Law: Vietnam Development Bank is provided with charter capital by the state budget, compensates for interest rate differences, complies with state budget estimates, and is subject to state financial management by the Ministry of Finance.
+ Regarding the Law on Credit Institutions: Vietnam Development Bank conducts internal control and internal audit; develops and promulgates internal procedures on business operations; implements statistical reporting, operational reporting and payment activities according to regulations of the State Bank of Vietnam.
- Clearly define the rights and obligations of the owner to the State at the Vietnam Development Bank, thereby clearly defining the roles and responsibilities of the Government, the Prime Minister, the Ministries and branches (Ministry of Finance, Ministry of Planning and Investment, State Bank of Vietnam...) in state management by industry and field. Assign the Ministry managing the main business sector to assume the role of owner representative for the Vietnam Development Bank (according to the Charter of the organization).