The Necessity Of Promoting The Efficiency Of Lending Activities For Individual Customers

Loan contract review: The loan contract review is essentially analyzing the loan in the loan condition it has been granted in order to assess the credit quality, detect risks, and take timely action. time.

Contract liquidation: If the term of the loan contract expires and the customer has fulfilled the obligation to repay both principal and interest, the bank and that customer will carry out procedures to liquidate the loan contract and release the property. and store loan documents in the archive.

In this case, the two banks and the customer proceed to liquidate the default credit contract. In case the bank supervises and finds that the customer seriously violates the commitments stated in the credit contract, which may affect the ability to recover capital later, the bank may recommend and proceed with the liquidation. Compulsory credit contract.

1.3. Effective lending operations for private clients

1.3.1. The necessity of promoting the efficiency of lending activities for individual customers

The efficiency of lending activities for science and technology is the fact that loans are used by customers for the right purposes, bringing benefits to the customers themselves, through which the bank can recover the principal and interest while the customer can repay the loan. debt, cover expenses, and satisfy their needs.

Promoting the efficiency of lending activities for science and technology is a decisive factor in the development of commercial banks.

The efficiency of lending activities for HCN is improved, which increases the profitability of the bank's products and services by reducing delays, reducing operational costs, management costs, and other costs. if the loan cannot be recovered. Promoting the efficiency of lending activities for science and technology will bring great profits to the bank, ensure solvency and enhance the bank's competitive advantage.

Good lending performance for science and technology facilitates the development of customers, brings diverse, attractive and effective business opportunities, enhances the image and reputation of the bank among customers. row. Thereby creating a motivation to help the bank become more attentive and ready to offer the best products and services to serve its customers.

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Promoting the efficiency of lending activities for science and technology is necessary to improve the quality of life and stabilize the society.

With economic development, the demand for lending activities, especially loans for HCN is increasing. Therefore, lending activities are increasingly developed to provide transaction facilities to meet all capital needs of the society. Therefore, the effectiveness of HCN lending activities is increasingly concerned. Through loans to individuals and households for production and business, helping them create jobs, improve living standards, stabilize incomes and contribute to socio-economic stability.

1.3.2. Criteria to evaluate the effectiveness of lending activities for individual customers

1.3.2.1. Qualitative criteria

Qualitative criteria are prerequisites for the effective implementation of lending activities, and are more difficult to standardize than quantitative ones, but make an important contribution to the assessment of performance. loans from commercial banks.

The qualitative indicators include:

Legal basis:

The lending activities of commercial banks are based on the regulations of the State and the State Bank. Besides, if the legal document system is simple but still ensures coherence, the bank's credit policy is flexible and suitable to the economic situation, it will improve the efficiency of lending activities. On the contrary, when lending activities are effective, the economy will develop accordingly. That proves the correctness and accuracy of the legal basis.

Credit processes:

With a standard lending process, done quickly while ensuring the correct principles is a measure of the effectiveness of commercial banks' lending activities. This is an important indicator that has a prerequisite influence on lending efficiency. In other words, for customers applying for loans, this is reflected in the simple and convenient procedures, and the quick, complete and timely provision of capital. However, it is still necessary to ensure the necessary safety principles and follow certain regulations. As a result, customers will save their transaction costs and time.

Reputation of NHM:

Customer evaluations of commercial banks are objective assessments of the service quality of that commercial bank, through a number of factors such as satisfaction of customers' borrowing needs, quick and timely borrowing time... This is one of the indicators that reflects the lending quality of each commercial bank well, because there is not a single bank with poor quality in lending activities that can gain the trust of its customers.

In short, lending activities are considered effective when they are implemented in accordance with relevant laws, regulations and regulations, attracting many customers but still ensuring application principles.

1.3.2.2. Quantitative indicators

Effectively carry out lending activities for science and technology when such loans are financed by stable capital sources, achieve credit targets, and are used by customers for the right purposes, effectively, and repaid. principal and interest to the bank on time. To evaluate the effectiveness of lending activities from the perspective of banks, the following criteria can be considered:

Loan turnover for science and technology:

Loan turnover for science and technology is the total amount that the bank has disbursed in the form of cash or transfer in a certain period of time. This entry reflects all loans issued by the bank for a certain period of time, regardless of whether the loan has been recovered or not, and reflects the volume of lending activities during the period. This is an accurate and absolute indicator of lending activities over a long period of time, showing the ability of credit activities over the years.

Proportion of sales of science and technology loans = (Science and technology loan sales / Total loan sales) x 100%

Outstanding loans for science and technology:

This indicator reflects the amount of money provided for lending activities to science and technology at a time. This indicator reflects the credit size and also reflects the bank's reputation. If the outstanding loan balance for science and technology is high, it shows that the bank has a reputation and diversified and rich services for customers. And conversely, low loan balance shows that the bank is not able to expand its customer network, lending activities for HCN are still not good. However, it does not mean that the higher the loan balance, the better the lending performance.

The efficiency of lending activities for high-cost HCN is the basis for increasing outstanding loans, so the expenditure of total outstanding loans for science and technology shows a part of the efficiency of this activity.

Proportion of outstanding loans to science and technology = (Balance of science and technology loans / Total outstanding loans) x 100%

This indicator shows the degree of concentration of the bank's lending activities on the group of HCNs. In order to study the fluctuations of the customer group to adjust the credit structure according to the customer group to be reasonable.

Revenue from loan collection for science and technology:

Debt collection is the total principal amount recovered by a bank from disbursements during a given period. Or it can be understood, debt collection revenue is the actual amount that customers repay to the bank in a certain period of time.

Proportion of debt collection for science and technology loans = (Revenue of debt collection for science and technology loans / Total revenue of debt collection)x 100%

This indicator reflects in a certain period of time with a certain loan volume, how much VND will be collected from loan sales. The higher this coefficient is evaluated, the better, the more effective the bank's capital recovery is. The higher this indicator also reflects that the bank's loans have achieved good results, the customer's ability to repay debts is at a stable level, and the bank's risks will be reduced.

Overdue debt targets:

Overdue debts are debts that are due to be repaid but customers are not able to repay to the bank. The ratio of overdue loans is an important indicator to evaluate the effectiveness of lending activities.

Overdue balance = (Overdue debt for science and technology / Total credit balance for science and technology)x 100%

This indicator shows how much overdue debt accounts for the total outstanding debt. High rate of overdue debt shows low lending efficiency; on the contrary, low delinquency ratio indicates high lending efficiency.

Bad debt targets for science and technology:

Bad debt is the most important measure to assess the soundness of institutions. It affects all major areas of banking operations. Because if bad debt increases, the possibility of capital loss also increases and then affects cash flows, thereby increasing the actual costs of capital recovery, opportunity costs, and borrowing costs. liquidity compensation. According to Decision 493/2005/QD-State Bank dated April 22, 2005 of the State Bank of Vietnam, bad debt is defined as follows: “Non-debt is debt classified into group 3 (subprime), group 4 (subprime) doubtful) and group 5 (potentially losing capital).”. Specifically, group 3 or less includes debts that are overdue for payment of interest and/or principal for more than 90 days, and at the same time, Article 7 of the above Decision also stipulates that commercial banks shall base on customers' debt repayment ability. to account loans into the appropriate categories.

Bad debt ratio for science and technology = (NPLs for science and technology / Total credit balance for science and technology) x 100%

This indicator shows how many VND in 100 VND of debt is bad debt. Bad debt reflects the difficult ability to recover capital, the bank's capital at this time is no longer at the normal level of risk but is at risk of capital loss.

NPL ratio on overdue debt:

Ratio of bad debt to overdue debt = (Non-debt for science and technology / Overdue debt for science and technology)x 100%

The ratio of bad debt to overdue debt shows how many VND out of 100 dong is overdue debt, how many dong is bad debt. This ratio tells us whether the probability of debt collection is high or low.

Credit reserve ratio:

According to Article 2 of Decision 493/2005/QD-NHNN stipulating: “Provision for risks (DPRR) is an amount set aside to make provision for possible losses due to the credit institution's customers not performing their obligations. as committed”. Therefore, banks use reserve funds to offset overdue debts of customers when risks occur so as not to affect the bank's profits much. Science and technology is no exception. Currently, to assess the problem of setting up and using provisions, banks often use the following criteria:

Credit provision ratio = (Risk provision made for Science and Technology / Total credit balance for Science and Technology)x 100%

This indicator shows how much the provisioning structure on the total loan balance is. According to current regulations, the larger the bad debt group accounts for the total loan balance, the more banks must set aside the DPRR. more. Because according to Decision 493/2005/QD-NHNN, “The specific provisioning for groups of debts according to regulations is Group 1 (Qualified debts): 0 ; Group 2 (Debts needing attention): 5 ; Group 3 (Subprime debt): 20 ; Group 4 (Doubtful debt): 50 ; Group 5 (Possible debt): 100”. Therefore, the higher this indicator, the greater the potential credit risk that the bank is facing, the lower the credit quality for science and technology.

Ability to offset risk:

Commercial banks operate in a fiercely competitive environment, subject to great control by the laws of supply and demand, the law of competition, etc., so they often face risks from all sides. If the bank does not grasp the financial situation, reputation as well as solvency of customers, credit risk is inevitable.

Coverage ratio for loans to science and technology = Provision for risks made for science and technology / Debts settled

If this coefficient is less than 1, it indicates that the bank cannot afford to cover the risk.

If this coefficient is equal to 1, it shows that the bank has the ability to offset risks in lending to science and technology. And this coefficient is greater than 1, which means that the DPRR is greater than the processed loan balance for science and technology.

Effective use of capital for science and technology:

This indicator determines the efficiency of a capital raising coin. When the bank mobilizes 100 VND of capital from Science and Technology, how much will it be able to lend? The higher this ratio, the more efficient the bank is.

Capital efficiency = (Total outstanding loans from science and technology / Total capital mobilized from science and technology)x 100%