Some Solutions to Improve Internal Control in Lending Activities for Household and Individual Customers at Agribank Quang Tri

+ Limited time and cost for internal inspection and control, the process of verifying information takes a lot of time and money for the bank and sometimes it is difficult to find out, so it can be overlooked or not properly evaluated.

+ Currently, Agribank Quang Tri still does not have a separate risk management department, so the assessment and implementation of risk prevention solutions are not really timely. Inspection and control work is only carried out periodically, so credit officers cannot detect all the risks and weaknesses that still exist in the lending process.

+ Although Agribank Quang Tri focuses on training and improving professional qualifications for staff, the lending process with a diverse customer base in all fields and professions makes the appraisal and assessment very difficult; partly depending on the ability to recognize and judge of the credit officers themselves.

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3.2 Some solutions to improve internal control in lending activities for household and individual customers at Agribank Quang Tri

Nowadays, banking activities are increasing, banking operations are becoming more and more difficult. Especially in the lending sector, the sector that brings the main profit to the bank. Therefore, strengthening internal control activities in general and controlling lending activities in particular to ensure safe and effective banking operations is very necessary.

Through the process of research and study, I would like to propose some solutions to contribute to improving the quality of internal control in lending activities for household and individual customers at Agribank Quang Tri as follows:

+ The division of responsibilities between credit officers and control officers should be clear. Control officers should be objective in the face of all errors, not prejudiced against errors that have been handled, and negligent in control work.

+ At Agribank Quang Tri, a credit officer undertakes many tasks in the lending process: receiving customer needs, collecting customer information, appraising, preparing appraisal reports, drafting contracts and documents, and

post-lending supervision…so it is impossible to specialize in work. This affects the objectivity in lending work. Therefore, the branch should reduce the workload and specialize each credit officer to ensure independence and objectivity in lending activities.

+ The loan options that customers submit to the bank are often more reactive, lacking important information for appraisal, so a separate appraisal department is needed for accurate appraisal and lending decisions. In addition, branches should establish specialized groups for lending activities by industry and industry group. When understanding the industry that needs loans, appraisal and risk assessment will be more accurate. Accurate appraisal will help control implementation quickly.

+ Strengthen post-lending supervision and inspection because this is the period of highest risk. Closely monitor the customer's debt repayment status, production and business efficiency as well as the current status of secured assets: review collateral for signs of depreciation such as damage, loss of value on the market... signs that the customer is likely to go bankrupt, lose the ability to pay debt, periodically every month, monitor and call, contact customers to urge debt collection.

Regularly maintain good relations with local authorities and organizations to support branches in recovering bad debts. In case customers are determined not to pay their debts, banks should choose the option of seeking legal intervention.

+ Banks need to ensure that control work must be carried out regularly and continuously for all customer loans to have timely and effective preventive and corrective measures. On the other hand, the internal control and inspection department should also have surprise inspections of lending work and loans, avoiding preparation and concealment of violations before inspection to promptly detect unusual events occurring during the lending process.

+ Perfecting policies for human resource development and training. To do so, it is necessary to perfect right from the recruitment and exam organization stages. Training is also given attention, in addition to participating in training programs organized by the branch.

In addition to sending branches to participate in or organizing professional training courses, organizing competitions for credit officers to practice knowledge and skills in handling situations... each credit officer and controller also needs to always promote the spirit of self-study, research documents, regimes, regulations and improve professional knowledge to complete all tasks well and meet the requirements of the diversity of loan purposes and collateral of customers.

+ At the same time, the branch also needs to have a proper salary and bonus policy based on specific work results to encourage staff to develop their abilities well. Avoid the abuse of privileges for personal gain, causing serious violations in the lending process. Besides, the branch also needs to create a comfortable working environment, good working mentality so that each staff can develop their full potential in their work.

The work of controlling lending activities for households and individuals at the Vietnam Bank for Agriculture and Rural Development, Quang Tri branch, is carried out in the right order and is implemented seriously. Besides the advantages that have been achieved, the internal control work still has shortcomings that need to be overcome. Through analysis and evaluation, from those remaining shortcomings, I have proposed a number of solutions: on policies for developing and training human resources, dividing responsibilities, strengthening inspection and supervision... I hope that the above policies will be useful and contribute to overcoming the shortcomings that still exist in the bank, helping the bank to develop further.

PART III: CONCLUSION AND RECOMMENDATIONS

III.1 Conclusion

In the current difficult economic situation, along with fierce competition from other domestic and foreign credit institutions, in order to stand firm in the market and constantly enhance their reputation and strengths, all commercial banks in general and Agribank Quang Tri branch must always strive, strive and improve. Especially for lending activities, internal control is extremely necessary to improve quality and minimize possible risks.

Through the process of studying, researching and completing the topic "Internal control of lending process for household and individual customers at Vietnam Bank for Agriculture and Rural Development, Quang Tri province branch", I have solved the following problems:

Systematize basic theoretical issues about internal control systems in general and internal control systems in lending activities for households and individuals in particular. The research process also helped me gain more knowledge about banking, lending activities, processes and working environment in banks.

Study and evaluate the current status of internal control in lending activities for household and individual customers; draw out the advantages and disadvantages in the lending process as well as in controlling lending activities, and discover some causes of the above limitations.

Provide some opinions on solutions, contributing to improving credit quality, improving human resource quality and perfecting internal control in the lending process for household and individual customers.

However, due to limitations in knowledge and practical experience: I have not had the opportunity to conduct field assessments, participate in internal inspections and controls with credit officers... limited access to some information from the bank because it is confidential internally. Because I do not have practical experience, the solutions provided are only

viewed from a personal perspective, analyzed mainly on qualitative factors, not clarifying all perspectives.

However, I still hope that this thesis can contribute to improve and enhance the quality of internal control in lending activities for household and individual customers at Agribank Quang Tri in the coming time.

III.2 Recommendations

I would like to propose some recommendations to improve the content of the following research topics as follows:

Research the internal control system of lending procedures for household and individual customers of banks of the same size to serve as a basis for evaluation and comparison, thereby having a better view.

Develop a system of criteria to evaluate the internal control process of the bank. Through that, propose some specific measures to help the bank improve its internal control system.

Together with credit officers, participate in customer appraisal and collateral appraisal to understand how to value assets, how to collect information during appraisal, and observe the periodic inspection and control process of controllers to understand the actual working method during the control process.

Expand the study of the entire lending process of Agribank Quang Tri to be able to evaluate the overall internal control system in the bank. If possible, expand the study of the internal control system of Agribank Vietnam.

If the above can be done, the evaluation results of the topic will be more complete and accurate, better serving the management and decision-making requirements of the Board of Directors of Agribank Quang Tri.

APPENDIX

[ Appendix 01 ]: Interview questions for CBTD, inspection and control officers at Agribank Quang Tri.

[ Appendix 02 ]: List of loan documents [ Appendix 03 ]: Appraisal report

[ Appendix 04 ]: Notice of loan refusal [ Appendix 05 ]: Credit contract

[ Appendix 06 ]: Debt acknowledgement

[ Appendix 07 ]: Notice of overdue debt transfer

[Appendix 08 ]: Minutes of inspection after lending

[ Appendix 09 ]: Request and plan for debt restructuring

Appendix 01: Interview questions at Agribank Quang Tri

Through interviews with 01 CBTD, 01 inspection-control officer, the answer is in the attached raw data.

CBTD

1. How does the lending process for households and individuals work?

2. When guiding customers to set up a credit profile, what documents and papers do you usually ask customers to provide?

3. When conducting an appraisal, what information do you check from customers? What difficulties do you often encounter during the appraisal process?

4. Who approves the disbursement? Has there been any case of incorrect disbursement to any customer?

5. After lending, what content will be checked and monitored?

6. After lending money to a customer, how long will it take for you to check and monitor the customer's use of the money? Will you go directly to the location to monitor?

7. When you see that a customer is unable to repay the debt, how should you handle the situation?

Internal control and inspection officer

1. How many stages does the control process in lending to individual and household customers include? Which stage do you think is the most important?

2. Do you encounter any difficulties during the control process? What are those difficulties?

3. When is inspection and control work usually carried out?