Evaluation of loan service quality for individual customers at National Commercial Joint Stock Bank

PART II. RESEARCH CONTENTS AND RESULTS

CHAPTER I. OVERVIEW OF LIVING SERVICE QUALITY FOR PERSONAL CUSTOMERS AT COMMERCIAL BANK

1.1. Overview of Commercial Bank

1.1.1. The concept of Commercial Bank

According to the provisions of Article 4, Law on Credit Institutions No. 47/2010/QH12 passed by the 12th National Assembly on June 16, 2010: “A bank is a type of credit institution that can be banking activities in accordance with this Law. According to the nature and operational objectives, the types of banks include commercial banks, policy banks, and cooperative banks.”

According to Dr. Nguyen Minh Kieu: “A commercial bank is a type of credit institution that conducts monetary business and banking services with the content of multiplying deposits, using deposits to grant credit, and provide payment services. accounting and other related forms.”

Although there are many different definitions of commercial banks, in general, commercial banks have the same characteristic that is to receive demand deposits and term deposits for use in lending, investment, and financial services. discount and other business services of the Bank.

1.1.2. Functions of a Commercial Bank

– Credit intermediary function

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Credit intermediation is considered the most important function of commercial banks. In this function, commercial banks act as a bridge between those who have excess capital and those who need capital. At the same time, due to the coincidence between income and expenditure in the business process of production and business subjects, some enterprises temporarily have excess capital, and others temporarily lack capital. For individuals, due to the difference between income and expenditure of each individual and household, it leads to excess capital in one person but lack of capital in another. Therefore, the capital tends to move from the place of temporary excess of capital to the place of temporary shortage of capital.

Through mobilizing temporarily idle monetary funds in the economy, commercial banks form a loan fund to provide credit to the economy. With this function, commercial banks both act as deposit receivers and lenders and enjoy profit as the difference between deposit interest rate and lending interest rate.

Depositors benefit from their temporarily idle capital through deposit interest, furthermore, the Bank ensures the safety of deposits and provides customers with convenient payment services. Borrowers will be able to satisfy their capital needs for business, spending and payments without having to spend effort and time searching for a convenient, sure and legal source of capital.

– Payment intermediary function

Commercial banks act as “treasurers” for businesses and individuals, making payments at the request of customers such as deducting money from their deposit accounts to pay for goods and services or enter customer’s deposit account for sales proceeds and other receipts at their command.

Commercial banks provide customers with many convenient means of payment such as checks, payment-collection orders, cash withdrawal cards, payment cards, credit cards, etc. Depending on their needs, customers can choose their own payment method. suitable. Therefore, economic entities will save a lot of costs, time, and ensure safe payment.

– Function to generate money

The credit intermediation function and the payment intermediary function are the basis for commercial banks to perform the money creation function.

Through the function of credit intermediaries and payment intermediaries, commercial banks have the ability to create book-keeping money (or precedents) shown on customers’ current deposit accounts at commercial banks. And through the credit intermediary function, the Bank uses the mobilized capital to lend, the loan amount is used by the customer to buy goods and pay for services while the balance on the account Customer’s payment deposit is still considered a part of transaction money, used by them to buy goods, pay for services…

With this function, the commercial banking system has increased the total means of payment in the economy, meeting the payment and payment needs of the society.

1.2. Overview of commercial banks’ personal lending activities

1.2.1. The concept of individual customers

Science and technology are individuals and households that need to borrow capital to use for the purposes of living, consuming or serving production and business activities of individuals or households.

1.2.2. Personal loan concept

Commercial banks are a financial intermediary that plays an important role in the economy, providing a large amount of capital for the activities of businesses, individuals and households through lending activities.

According to Clause 16, Article 4 of Law on Credit Institutions No. 47/2010/QH12: “Lending is a form of credit extension whereby the lender assigns or commits to hand over a sum of money to the customer for use for the intended purpose. determined within a certain period of time by agreement with the principle of repayment of both principal and interest.”

Customers are individuals and households play an increasingly important role in lending activities of commercial banks. Individuals and households borrow money from commercial banks to serve their consumption needs or for their investment, production and business activities.

Thus, science and technology lending is a form of credit extension, whereby the Bank provides individuals or households with a sum of money to use for consumption, investment or production and business purposes within a certain period of time. certain time with the principle of fully repaying both principal and interest on time to the Bank.

1.2.3. Features of personal loans

– About the loan object

Borrowers are individuals and households that need to borrow capital to serve their consumption or production needs.

Science and technology often has a very large number, the borrowing needs of individuals and households are also very diverse. Depending on different regions, the borrowing needs of science and technology are also different based on the economic situation, education level, income level, customs and consumption habits of that area.

– The term of science and technology loans is usually short-term

Loans for science and technology are often very diverse, including short-term, medium-term and long-term loans. However, science and technology borrow capital for the purpose of consumption, small production and business, so it is mainly short-term loans, only a very small part is medium and long-term loans.

– Size of loans

The value of loans is often small, odd but the number of loans is often very large. Because science and technology loans meet individual and household needs for consumption or business purposes, the loans are not of great value. However, the object of science and technology is the largest, loans often arise when customers have consumption or business needs. Therefore, leading to a large number of loans, the profit from this activity is quite high if the Bank knows how to attract customers and does other related management well.

– Personal loans are often cyclical sensitive

The number of loans depends on the needs of individuals and households and their ability to pay, so the demand for loans depends on customer psychology and the borrower’s economic cycle. Personal loans will increase when the economy has high and stable growth, science and technology will have a more optimistic attitude, they expect to have more income in the future, thereby promoting spending on loans. consumption or production at the present time. Conversely, when the economy is in recession, people tend to cut spending, reduce investment and production and business activities, and instead increase savings and limit borrowing from banks.

Income level and education level are two factors that greatly affect the loan demand of customers. People with high incomes tend to borrow more than their annual income. For families where the head of the family or the main income earner has a high level of education, borrowing is a tool to achieve the desired standard of living.

– Interest rates for science and technology loans are usually higher than those of other loans

Due to the size of the loans, it often leads to high lending costs (in terms of time, manpower to appraise and manage loans), and at the same time, the risks of these loans are also very high. Therefore, interest rates for science and technology loans are usually higher than interest rates for other loans of commercial banks.

Personal loans have high and “rigid” interest rates, and loan demand is less sensitive to interest rates. That means it’s enough to cover the Bank’s cost of raising funds, unlike most business loans these days, which offer market-variable interest rates, typically fixed rates for personal loans. If the source of income for science and technology is stable, if the Bank is able to control it, the interest rate applied to customers will be reduced, because the risks from lending have been limited.

Banks use a variety of methods to determine the actual interest rate on a personal loan. But most interest rates are determined based on the prime rate plus the marginal return and the risk premium.

– Personal loans with high credit risk

The type of personal loan always contains quite high risks. Because the borrowers are individuals and households whose financial situation is easy to change depending on their work status and health.

In production and business activities, individuals and households often have weak management skills, lack of experience, outdated science and technology, and therefore have poor competitiveness in the market. Therefore, the Bank will have to face the risk when the borrower is unemployed, has an accident, goes bankrupt. On the other hand, the appraisal and decision on lending to science and technology are often incomplete in terms of information such as customers deliberately hiding information about their health situation or their work to get a loan, which is also one of the reasons leading to credit risk status for loans to science and technology. Therefore, in order to limit the above risks, the Bank often requires science and technology to have collateral when borrowing.

1.2.4. The role of lending to individual customers for commercial banks

Science and technology lending has a great role for commercial banks and science and technology as well as for the economy and society. Lending has the effect of speeding up the cash flow process, taking advantage of the great potential of capital for economic development.

– For Commercial Bank

Science and technology is a potential market that needs to be exploited and expanded. Science and technology are very diverse, the number is increasing. Contributing to increasing profits for the Bank, the growth of personal services contributes to accelerating loan repayments, which means growth in income for the Bank. Bringing great benefits to the Bank because loans are often priced higher than business loans of enterprises.

The subjects of science and technology are not only a group of people who need to borrow capital, but they are also a force that provides banks with a relatively large and stable amount of capital. Here, the main source of capital is the savings of individuals.

The bank needs to create a close relationship with this group of customers. Thereby, commercial banks have just access to loans arising from consumer demand or business expansion of science and technology. Besides, when there are savings formed from this customer group, that bank is also the place where this customer group often chooses to deposit savings and will use other services of the Bank in the future. Thereby creating for commercial banks to have a stable number of customers and improve competition with other banks.

With an increasing standard of living, science and technology have diverse needs. Therefore, commercial banks need to expand their portfolio of products and services, increasing their ability to meet the needs and desires of customers. Thereby, the Bank can expand its market share, and help the Bank retain customers and attract new customers.

– For individual customers

Science and technology are consumers, especially those with low and middle income, when borrowing capital from commercial banks, they will promptly meet the needs arising in the present before having enough financial capacity in the future. such as: health, education, shopping, tourism…

Science and technology are households that have needs to invest, produce and trade in shops, shops, agricultural production… When providing credit to these subjects, it will create a new income for them, in order to improve and improve their quality of life, help them have more motivation and resources to overcome difficulties, use capital effectively.

Thus, lending to science and technology, whether for consumption or production purposes, has a direct impact on individuals as well as their lives in society, giving them conditions to improve their quality of life. economic stability.

– For socio-economics

Science and technology loans provide financial resources, cover people’s spending needs, promote consumption, thereby increasing domestic demand in the structure of gross domestic product, limiting dependence on exports. exports and promote sustainable economic development.