LV thạc sỹ_Improving lending effectiveness at North Asia Commercial Joint Stock Bank

TABLE OF CONTENT
LIST OF TABLE
LIST OF DIAGRAM
ACKNOWLEDMENT............................................................................................1
CHAPTER I: INTRODUCTION...........................................................................2
1.1 Rationale..........................................................................................................2
1.2 Research objective...........................................................................................3
1.3 Research methodology.....................................................................................3
1.4 Scope of research.............................................................................................4
1.5 Structural topic.................................................................................................4
CHAPTER II: THEORETICAL FUNĐAMENTALS OF LENDING
EFFECTIVENESS OF COMMERCIAL BANKS................................................5
2.1. Literature review.............................................................................................5
2.2. Lending activity of commercial banks............................................................6
2.2.1. Definition..................................................................................................6
2.2.2. Importance of lending activity..................................................................6
2.2.3. Categories of lending................................................................................8
2.3. Lending effectiveness of commercial banks..................................................11
2.3.1. Definition................................................................................................11
2.3.2. Indicators reflecting lending effectiveness of commercial banks............11
2.3.3 Conditions ensuring lending effectiveness of commercial banks.............15
2.3.3.1. Inside condition...............................................................................15
2.3.3.2 Outside condition..............................................................................17
CHAPTER III: CURRENT SITUATION OF LENDING EFFECTIVENESS
AT NASB- THAI HA BRANCH...........................................................................20
3.1 Overview of NASB........................................................................................20
3.1.1 History of North Asia Commercial Joint-Stock Bank – Thai Ha Branch. 20
3.1.2 Organization structure, function and task of each department.................21
3.1.2.1 Organization structure.......................................................................21
3.1.2.2 Function and task of each department...............................................22
3.2 Current situation of activities at NASB-Thai HA Branch...............................25

3.2.1 Fund mobilization....................................................................................25
3.2.2 Credit performance..................................................................................28
3.2.3 Other activities.........................................................................................29
3.2.3.1 Foreign exchange trading..................................................................29


3.2.3.2 Internal payment operation...............................................................30
3.2.3.3 Payment service................................................................................30
3.3 Current situation of lending activity at NASB-Thai Ha branch......................30
3.3.1 Indicators reflecting lending volume scale...............................................30
3.3.1.1 Outstanding loans.............................................................................30
3.3.2 Indicators reflecting safety group.............................................................36
3.3.2.1 Overdue debt....................................................................................36
3.3.2.2 Mortgage loans.................................................................................39
3.3.2.3 Capital turnover................................................................................40
3.3.3 Indicators reflecting the level of profitability group.................................42
3.4 Evaluations of lending effectiveness at NASB-Thai Ha branch.....................44
3.4.1 Advantages...............................................................................................44
3.4.2 Disadvantages and cause..........................................................................45
3.4.2.1 Disadvantages...................................................................................45
3.4.2.3 Cause................................................................................................46
CHAPTER IV: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE
LENDING EFFECTIVE AT NASB – THAI HA BRANCH...............................49
4.1 Development orientation of NASB lending activity.......................................49
4.1.1 NASB General Development Orientation in 2011...................................49
4.1.2 NASB-Thai Ha branch General Development Orientation in 2011.........51
4.2 Solutions for lending effectiveness improvement at NASB- Thai Ha branch.52
4.2.1 Boosting capital mobilization in order to meet the needs of customers. . .52
4.2.2 Appraising quality....................................................................................53
4.2.2.1 Improving quality in collecting information.....................................53

4.2.2.2 Improving quality in processing information....................................53
4.2.2.3 Solution to operating organizations..................................................54
4.2.3 Improving lending process.......................................................................54
4.2.3 Enhancing risk management activities.....................................................55
4.2.4 Improving Network, organization restructuring and human resource......56
4.2.5 Strengthening management and supervision............................................57
4.3 Recommendations..........................................................................................58
4.3.1 To North Asian Commercial Joint Stock Bank.........................................58
4.3.2 To The State Bank of Vietnam.................................................................59
4.3.3 To Government of Vietnam......................................................................60
CHAPTER V: CONCLUSION.............................................................................61
REFERENCES......................................................................................................63


LIST OF TABLE
Table 3.1: Structure of fund mobilization according to term of deposit...................27
Table 3.2: Other activities of NASB-Thai Ha branch..............................................29
Table 3.3: Annual report from 2008 to 2010............................................................30
Table 3.4: Lending activity report from 2008 to 2010.............................................31
Table 3.5: Overdue debt from 2008 to 2010............................................................36
Table 3.6 Mortgage loan of NASB - Thai Ha branch from 2008 to 2010................39
Table 3.7: Capital turnover at NASB-Thai Ha branch.............................................41
Table 3.8: Profits from bank credit operation from 2008 to 2010............................42
Table 4.1 Business strategy of NASB in 2011.........................................................50
Table 4.2 Business strategy of NASB-Thai Ha branch in 2011...............................52


LIST OF DIAGRAM
Diagram 3.1: Organization structure of NASB-Thai Ha branch..............................22
Diagram 3.2: Situation of fund mobilization in NASB – Thai Ha branch ..............25

Diagram 3.3: Structure of deposits by each type of customer in each stage..................26
Diagram 3.4: Status of credit balance of NASB-Thai HA branch (2008-2010).......28
Diagram3.5: Outstanding loans in terms of maturity from 2008 to 2010................32
Diagram 3.6: Outstanding loans by industry sector.................................................33
Diagram 3.7: Credit balance by types of customers (2008-2010)............................34
Diagram 3.8: Overdue debt by industry sector from 2008 to 2010..........................37
Diagram 3.9: Overdue debt by customer from 2008 to 2010...................................38
Diagram 3.10: Outstanding loans of mortgage loans from 2008 to 2010................40
Diagram 3.11: Income from lending activity from 2008 to 2010............................43


ACKNOWLEDMENT
In the industrialization and modernization of the country, now our economy is
experiencing difficulties of inflation, rising prices, natural disasters ... All these
factors influence Small and medium enterprises and banks. One of the conditions
leading to business survival and development capital is especially bank loans. In
this relationship, both bank and customer not only benefit each others. But also
bring benefits to the economy. Enterprise and individual capital need for
production and business investment, purchase of machinery and equipment ... but
the banks need to borrow money to customers profitable for banks. So development
lending activity is essential for North Asia Commercial Joint-Stock Bank-Thai Ha
Branch
I would like to thank my school National Economics University, for having
given me this opportunity to put my theories I learnt into practice. Also, I want to
thank all my teachers who taught and trained me, helping me improve my abilities
and skills which will support me in the real world.
I give thanks to my supervisor, Mrs ….., Director, for having trained me and
constantly guided and supported me during the internship period.

CHAPTER I
INTRODUCTION
1.1 Rationale
In funding sources for business and social-economic activities, bank credit
is one of the most important sources which cause a direct impact on the growth and
development of the economy as well as other social activities. On the ground of
increasingly deep and wide economic integration of Vietnam into the region and the
world, especially after becoming an official member of World Trade Organization
WTO, the operation of the banking system in general and the role of bank credit in
particular will further constitute strong influence, create a driving force for the
entire economy in achieving growth and greater development.
Moving in the same direction with the whole banking system, credit quality
at North Asia Commercial joint-stock banks has been improved consistently. In
particular, the scales as well as the overdue debt and bad debt ratio experienced an
extensive drop from a trough of crisis at the end of 2008. However, the quality of
lending operation which is the main target of many commercial banks in general
and NASB in specific was improved negligible. It is the fact that the bad debt
account for the most proportion of overdue debt while this value are not fell a lot in
comparison with the previous year.
In the banking system for NASB, NASB-Thai Ha branch is one of the most
typical branch attracted a large amount of deposit of and execution of many lending
operations with small balances. The branch provides significant capital for large
business customers of the economy. In particular, lending activities of affiliates
account for a large proportion of the total assets of branches in particular and the
NASB system in general.


In recent years, lending activities of the branches has gained many
achievements, but still remain some limitations. Therefore, lending effectiveness is
low and not suitable with the scale of the branch. Besides, it is not meet the capital

demands for the economy.
As the result, a study on principles and practices of lending activity in
commercial banks, and NASB-Thai Ha branch in specific, the target of research is
evaluating lending effectiveness specially, exactly for give solutions to improve
lending situation of Thai Ha branch. In addition, along with suggested solution for
improvement appears to be extremely significant to banks as well as to the customer
and the economy as the whole. That is reason I choose the topic: “Improving
lending effectiveness at NASB-Thai Ha branch”

1.2 Research objective
- To review of principles and theoretical background of credit and lending
activity in commercial bank.
- To learn the basic situation and currency lending activity of NASB-Thai Ha
branch.
- To evaluate result and effectiveness of lending activity of the branch. Then,
discover their disadvantages and advantages in current situation.
- To propose solutions to improve the lending effectiveness of the branch.

1.3 Research methodology
Primary data: Using this method to collect information of lending operation
and has overall view of the branch, operation structure, working process of staff in
the branch. I use following methods:
- Interviewing the staff of credit department and customer of the branch.


- Proving directly questions for interviewers to explain in problem.
- Observing departments, the working process of employee in the branch.
Secondary data: The secondary data of this method was acquired through
reading many book, legal document for lending, annual report of NASB-Thai Ha.
Then, accessing the issues in theory and practice, this subject uses the concepts of

Bank Credit, and then combines with statistics, analysis, synthesis, and comparison
methods at NASB in order to clarify matters.

1.4 Scope of research
- Time: The data collected was limited, focused research in the period from 2008 to
2010.
- Space: NASB-Thai Ha branch.
- Content: Theory and practice of lending operation of bank.

1.5 Structural topic
The thesis is constituted by five chapters:
Chapter I: Introduction
Chapter II: Theoretical fundamentals of lending effectiveness of
commercial banks
Chapter III: Current situation of lending effectiveness at NASB-Thai Ha
branch
Chapter IV: Solutions to improve lending effectiveness at NASB-Thai Ha
branch
Chapter V: Conclusion


CHAPTER II
THEORETICAL FUNĐAMENTALS OF LENDING
EFFECTIVENESS OF COMMERCIAL BANKS
2.1. Literature review
A commercial bank is a financial intermediary which collects credit from
lenders in the form of deposits and lends in the form of loans or investments. A
commercial bank holds deposit for individuals and businesses in form of checking.
The lending effectiveness issue in Commercial bank is a practical problem
and. As a result, it has been chosen as thesis by economic students. Some topic was

reached:
Student Nguyen Thi Hoa: “Some solutions improve credit effectiveness of
Vietnam Joint Stock Commercial Bank For Industry And Trade – Ba Dinh Branch
-2007”
Student Do Van Viet: “Some solutions improve consumer lending
effectiveness of NASA – Thai Ha in 2009”
Student Nguyen Thi Hoa: “Improving effectiveness lending for small and
medium enterprises at NASB-Thai Ha branch in 2009”
Three reports show disadvantages of lending operation of banks, the detail
problem are as follows:
- The bank has not built credit limitation for each group of customer.
Therefore, size monitoring operation and credit limitation of bank has many
disadvantages and ineffectiveness.


- Lending appraising process is not fully, closely. Not fully concerning
about the effectiveness of projects, legal characters of documents, financial status
and financial ability of customers.
- The lending process has not strictly, so bad debt ratio has increased.
Documents have been unsystematic; thus, when have overdue debts and bad debts,
credit officers have faced with many difficulties in handling the issue.

2.2. Lending activity of commercial banks
2.2.1. Definition
Lending: means a form of credit extension under which the lender gives or
commits to give the borrower a sum of money for use for a specific purpose in a
certain period as agreed upon on the principle of payment of both principal and
interest.

2.2.2. Importance of lending activity

Lending activity is very important because
Firstly, commercial bank has functions below, which promote economy
activity
- The intermediate payment function: This commercial bank acting as
treasurer for businesses and individuals, makes payments follow to the requirement
of customer as deductions from their deposit accounts for payment goods, services
or enter into a deposit account customer of the sales proceeds and other revenues
under their command. Commercial banks offer for customers more convenient of
payment means such as cheques, standing order, charge card, cash card, credit
card… Depending on demand, customers can choose appropriate payment methods
for themselves. Whereby the subject of Economics do not keep money in your
pocket, carrying the money to meet creditors, meet who have to pay whether near or


far. Instead, they can use a method with which to make payments. Therefore, the
subject of economy will save a lot of cost, time and ensuring a secure payment. This
function is generally invisible prompted the circulation of goods, payment speed,
speed of movement of capital, thereby contributing to develop economic.
- Credit intermediary function: Credit intermediaries, commercial banks the
most basic business activities can reflect the characteristics of its functions. The
functions of the essence of business through the bank's liabilities, the society
focused on a variety of idle money in the bank to further business through the assets
and put it toward economic sectors; commercial banks as lenders of capital and
currency The borrower or on behalf of intermediaries, to achieve capital intermediation, and attract capital from the cost and payment of loan interest income, the
difference in investment income, for interest income, the formation of their profits.
Commercial banks become the sale of "capital goods" and "big businessmen”.
Commercial banks through the credit intermediary function between the capital
surplus and shortage of Fusion, does not change the ownership of monetary capital
to change only the right to use monetary capital.
- Credit creation function: Creating credit is an important function, which

reflects the nature of the commercial banks. With the target is to seek profit as a
primary requirement for its survival and development, the commercial bank with its
businesses has been generally invisible performing the credit creation for the
economy. Money making function is executed on the basis of two other functions
that are credit function and payment function. Through the intermediary credit
function, banks use the mobilizing capital for loaning, the loan amount that the
customers borrow is used to purchase goods and pay services. With this function,
the commercial banks system has increased liquidity in the economy. The
commercial bank is a credit institution which its activities are mainly currency
trading.


Secondly, lending is a typical credit activity of commercial bank, it has an
important role in the activities of commercial banks in particular, consumers and the
economy in general. It has important role for living of population and economy.
- To banks: lending activity ensures to banks implemented the intermediate
payment function for the economy. On the other hand, lending activities are
accounted for high density in the structure asset of banks and items will bring huge
profits for banks. Therefore, lending activities of banks play an important role in the
survival and development of commercial banks.
- To customer: to ensure to continuity of business activity, the enterprises
require large enough amount of capital. Besides the own capital (equity) and credits
commercial, loans from banks has long become a regular source of capital and an
important business decision for the existence and development of many business
- To economy: Banks with financial intermediaries and create money,
moved from the capital, there is no need to have a need to use. Through lending,
banks have provided a large amount of capital for the economy to turn savings into
investment.

2.2.3. Categories of lending

Lending activity for enterprises is diversified and can be classified
according to the different criteria such as: time, the kind of money, interest,
audience, purpose, scope
A common classification is the lending classification in the form of loans.
Accordingly, the lending is divided into several types as follows:

 Based on time


Short-term credits: Business loan with term under 12 months (1 year)
aimed principally at funding purchases of business inventories, meeting payrolls,
paying taxes, and covering other temporary expenses.
Medium-term credit: Business loan with term usually over 1 year to 3, 5
and 7 years depending on each country norm (our country is up to 3 years) aimed
principally at funding permanent additions to working capital; repairing, restoring,
replacing fixed asset or technical improvement and rationalization of production
process, technology innovation and building of small constructions which have
rapid capital recovery capability.
Long-term credit: Business loan with term over 3, 5 and 7 years
depending on each country norm with purpose similar to mid-term credit but with
large-scale projects which have longer capital recovery period.

 Base on form of credit
An overdraft: occurs when money is withdrawn from a bank account and
the available balance goes below zero. In this situation the account is said to be
"overdrawn". If there is a prior agreement with the account provider for an
overdraft, and the amount overdrawn is within the authorized overdraft limit, then
interest is normally charged at the agreed rate. If the negative balance exceeds the
agreed terms, then additional fees may be charged and higher interest rates may
apply. An overdraft is applied when customers need borrow short-term loan.

Moreover, it only applies with confidence customer, regular income. But, customer
must pay very high interest, is 1.5time nominal interest.
One-time lending: One of the most common loan forms for the bank's
customers having no need for regular loans or not to be granted for overdraft loan.
For each time in demand of capital, customers must submit credit application and
supporting papers to bank. Bank will analysis customers and their funded schemes


and signed for loans if they meet the requirement, determine the size of loans, the
disbursement period, repayment period, interest rates and guarantee requirements if
necessary. Loans are separated into different records. The advantage of this method
is clear procedures, the bank active in lending. But, the disadvantage of is prolix
procedure and the enterprise is not flexible in using capital, only suitable for
businesses has recurring supply capital.
Lending on credit line: The business which the bank agreed to provide
customers a credit limit. For this limit, customers to borrow many times during that
period on condition: the demand reasonable and not exceed the limit. It applies
short-term lending to has a reserve of goods and material, which is not temporary.
Lending rotation: Lending is based on the movement of industrial goods.
When purchasing goods, enterprises can have a lack of capital, therefore banks will
lend to buyers and take repayment when goods are sold. Bank and customer will
negotiate with each other about the loan terms and conditions, credit limit, the
supply and demand of goods. Line of credit can be agreed upon in one or a few
years.
Installment loan: that is repaid over time with a set number of scheduled
payments. It is the form that banks allow customers to pay several times the original
credit terms. This form is often applied for consumer lending in medium and long
term loans, loans for the purchase of fixed assets or long-term.
Indirect loans: Indirect lending is lending by the ultimate lender to a
financial intermediary who pools the funds of many lenders in order to re-lend at a

markup over the cost of the funds. The ultimate borrowers are normally unknown
to the ultimate lenders. A lender faces less risk in indirect lending because, as a
specialist in the field, the intermediary normally has a well-established credit
standing. Of course, lower risk usually means less gain for the lender. Indirect
lending generally offers lower cost to the ultimate borrower for small or short-term


loans. Most bank loans are direct loans. In addition; banks are developing other
forms of indirect lending which is a form of lending through intermediary
organizations such as supplier, producer group

2.3. Lending effectiveness of commercial banks
2.3.1. Definition
Lending: means a form of credit extension under which the lender gives or
commits to give the borrower a sum of money for use for a specific purpose in a
certain period as agreed upon on the principle of payment of both principal and
interest.
Lending effectiveness refers the mutual relationships among profit, income
and total outstanding loan from lending activities. Consequently, to evaluate lending
effectiveness, we should compare the income obtained with the expenses, and
compare the profit obtained with the outstanding loan.

2.3.2. Indicators reflecting lending effectiveness of commercial banks
A: Group indicator reflecting the scale of bank credit


Total lending revenue is an indicator reflecting the scale of bank credit

activities during a period of time. The higher the total loan amount, the closer the
relationship between bank and their customer, consequently, the more the banks’

ability to generate huge profits. However, high total loan amount does not always
reflect good credit quality which also depends on other factors.
The lending revenue reflects the scale of bank lending to each particular
customer and with the economy in a period of time.
The lending revenue depends on the size, lending policies of banks,
economic cycles, regulatory environment.




Total outstanding loans are the aggregate principal amount of

customers outstanding at a certain point of time. It is the capital of the bank hold by
their customers. This indicator reflects the bank's future earnings prospect, therefore
it is closely monitored by bank to control the amount of bank capital as well as
verify whether funds are used properly by customer or not.
The outstanding loans reflect the liquidity status, ability to meet the
demand for bank loans.
The outstanding loans are the basis for determining the quality of the loan.
B: Group of indicators reflecting safety


Overdue debt:

This indicator assesses the credit quality in general and the safety in
particular. Most overdue debts are in problems. The higher the ratio, the higher the
level of risk in credit operations and the lower the credit quality of banks in most
cases.
In banking activity, the higher this ratio reflects the quality of the loan lower
and the safety of the Bank lower.

However, the “overdue debt ratio” of bank carrying temporary characteristic.
Therefore, it has reflects exactly the safety of the loans.
Overdue debt is classified as follow:
•Category 2 (special-mention): debts that are overdue less than 90 days and
rescheduled debts that are not due;


•Category 3 (sub-standard): debts that are overdue from 90 to 180 days and
rescheduled debts that are overdue less than 90 days;
•Category 4 (doubtful): debts that are overdue from 181 to 360 days and
rescheduled debts that are overdue from 90 to 180 days; and
•Category 5 (loss): debts that are overdue more than 360 days, rescheduled
debts that are overdue more than 180 days and debts that are subject to rescheduling
arrangements as directed by the Government.



Capital turnover

 Mortgage loans

Collateral is one of cushion safety for the lending activities of banks,
ensure debt repayment obligations of customers and preserve capital for banks.
Therefore, the mortgage loans affect safety of the loan.
Structure of loan catalog
The diversity of the catalog: this diversity is the variety of occupations,
economic composition, types of lending…
Depending on the size, characteristics, potential market, that each bank builds
a catalog of loans for themselves with different variability.
In general, a portfolio diverse more, will reduce more the risk of nonbanking system.

C. Group indicators reflecting profitability
Profitability of lending activity is related closely to the safety of lending
activities, banks can only profit on the basis of ensuring the safety of their loans.
Any losses that banks face also affect the income or profits of the bank.


The Profit from lending:

This indicator reflects result of lending activities. It evaluates income and
expense from lending.
-

In addition, this indicator is also to evaluate whether or not the

effectiveness of lending operation.



The Profit from lending/ Total outstanding
- This indicator shows the amount of interest earned from each

Vietnamdong lent out.
- This indicator reflects the monitoring of lending costs of the bank and
the level of profitable from lending activities.
- This ratio is high means the level of profitable from the lending activities
is high because of good costs saving. As a result, it will increase profit.


The Profits from lending/Total income: is the ultimate target of any

enterprises in general and bank in specific. Profit from lending activities over total
profit in general express how much is earned from one unit of investment compare
to other objects, therefore it is also the indicator showing the quality of the loans.


- Indicate the proportion of profit from lending in the bank's total income
- The bank's revenue sources include income from interest, income from
deposits in credit institutions, revenue from services, income from investments, and
other revenues.

2.3.3 Conditions ensuring lending effectiveness of commercial banks
2.3.3.1. Inside condition

 Capital availability
The branch needs large capital to meet the borrowing demand of customers.
It is reason to the branch should diversify forms of capital mobilization, expand
capital mobilization from a capital source. In addition, interest rates rate important
factor that customer often takes to decide to deposit. Because, the interest rate
policies of branch need to become flexibility to attract customers, but it still ensures
profit for bank.

 Credit policy and procedures
- Credit policy is established in order to embody the bank strategy goal and
promote credit activity in the same direction with strategy. A rational, flexible,
customer satisfaction-oriented credit policy will facilitate the credit activity and
lending policy in particular. Credit policy is designed for specific goals in each
period which directly affect to the size, nature and quality of the credits as well as
the bank's activities. Credit policy is designed to ensure the profitability of credit

operations in harmonizing with the interests of depositors, borrowers and the banks
themselves. Accordingly, a reasonable credit policy will help banks operate more
efficiently and improve the quality of bank credit.


- Bank credit procedure: It is factor, which influence directly to lending
activity. Bank credit procedure is a combination of rules and regulations of the
banks in granting credit. It includes different phases, starting from the stage of filing
records, credit appraisals, approved credit, disbursement, monitoring debt collection
and liquidation of credit contract. Each phase is important to the granting of credit,
so it directly affects the quality of the loan. Establishing a reasonable credit process
is the foundation for developing appropriate credit model, administrative procedures
accordance with the provisions of law, and become the control criteria of activities.
Besides, a convenient credit procedure also encourages customers to bank loans
which help the bank extend their bank credit service. Furthermore, if bank has a
prolix procedure and many processes the customers will find other bank. That affect
to lending activity of the banks.

 Technology
During the huge explosion of information technology, the technology is an
indispensable part and has great influence to the performance of the banking
business in general as well as credit quality in particular. The influence of
technology banking to credit quality reflected in the credit risk management system
as well as process standardization. Each kind of credit has its specific nature and
credit risks, so it is necessary to have different risk management measures to be
reasonably consistent with the complexity of each type. The banks have been
innovative technology to suit development of the market. If not, the banks will
become obsolete compared to other banks. This will cause tend to banks lose
advantage competition.

 Human resource
The labor force impacts directly productivity of labor, to the use of technical
equipment, the use of capital ... so it impact directly business performance of
enterprises.

Human resource

quality

is

reflected

by

the

qualifications,


communication ability, and ethics. The human factor determines the success or
failure in performance of banks. The quality of labor decisions effectiveness of
improving quality in operations of the Bank. The officers of the branch always
trained professionally and qualified.
2.3.3.2 Outside condition

 Economic environment
The economic environment has strong influences on the bank activities in
general, and the credit operation in particular. A stable economy will create
favorable conditions for the banking operation in general banking and credit

operations in particular. Because in these conditions, enterprises do business more
effectively, expand their lending business more easily. So, it will increase demand
for loans from which banks can expand credit activities.
The change in economic environment, such as economic cycle, inflation,
exchange rates cause a big effect on expansion and quality of credit. For instance,
high inflation affects the price of product in market, which makes population and
corporations have to carefully consider the borrowing interest rates in comparing
with the efficiency of capital utilization and finally make decisions to borrow or not.
As a result, the credit quality of banks in general and efficiency of banking
operations in particular bear a large influence from the economic environment in
which it operates. It is the problem that banks have to do a better research and
forecasting of fluctuations in the market to adapt quickly to such changes.

 Regulation
This factor is related to the legal environment in which firms operate. This
legislation can positively and negatively affect the businesses. To do well in a
business with a special product likes money, banks need a full, consistent and


suitable status with requirement of economy. If the legal system isn’t strict,
production and business activities cannot be implemented smoothly. The legal
system has to create a legal environment that is favorable for production and
business activities to be conducted effectively. Additionally, it should provided
bases for settling complaints and disputes arising in economic environment and
social relations. Both the bank and their clients will have mutual benefits and credit
quality will ensured only if the latter obey the law.
In addition, the commercial banks have to conform to the law such as credit
laws, competition laws, employment laws… Especially, the banks conform to the
control of SBV in order ensure the safety and efficiency of bank operation. As the
result, any change in law can affect the bank operation. Therefore, the banks need to

not only deeply investigate law provisions and effectively apply to credit operation
but also seize the changes to best adjust with them.

 Social
Stable society is a favorable and attractive environment for investors and
enterprises to grow, which creates a solid basis for expanding and enhancing credit
quality. Political risks such as military coup, new elected government discontinuing
certain policies and programs, terrorism, international isolation, war, can severely
impact the quality of credit asset and may lead to losses. This factor affect strongly
to customers, as a result it affects directly to loan decision of customer.



Competition

Currently, in Vietnam there are many banks, which the scale of capital is not
the same. Lending activity is almost main activity of banks. Therefore, competition
in this field is very harsh. Banks do not stop giving new policies to attract more
customers for their own use of flexible interest rate policy, promotion, improving
the quality of services, facilitie. Furthermore, in Dong Da District, there are many


banks. Lending policies of banks in the district also changed very flexible, with
attractive interest rates as well to influence the lending activities of banks.
Together with the development of the economy, the competition in banking
service is becoming more and tenser. Lending activity of any bank is not only
facing with the competition from other banks but also from other financial
institution such as finance company, insurance company…Consequently, banks
should understand and learn from other competitors to continuously innovate their
products and services and improve their competitive advantages as well.

 Customer factor
This factor reflects quality of banks. If the bank provides good services,
customers will feel satisfy and will use their products. If customers have a steady
income or a good business situation, and have ability to pay for bank loans, the
bank will be easier for lending. Especially, if customers have a high educational
level, prestige, morality, the bank will be easier to introduce and promote products,
reduce risk and bad debt. This factor is one of the most important factors when the
bank determines to lending.


CHAPTER III
CURRENT SITUATION OF LENDING EFFECTIVENESS AT
NASB- THAI HA BRANCH
3.1 Overview of NASB
3.1.1 History of North Asia Commercial Joint-Stock Bank – Thai Ha
Branch
NASB was founded and acedt under the Decision 0052/NHGP dated
September 1st, 1994, Operation Center located in Vinh city- Nghe An province.
NASB is Joint-Stock Commercial Bank that has largest sales operations in the
Central Vietnam. The initial charter capital was 155billion VND, in June 2010
NASB’ charter capital is 3000 billion VND. Along with the development of the
economy, NASB is continuously expanding the scale of capital and assets, the scope
of activities and types of products and services. The network of NASB has been
expanded into the provinces, key economic regions of the country ( Nghe An,
Thanh Hoa, Ho Chi Minh, Hanoi, Can Tho…)
NASB offers diversified services of financial bank such as: account domestic
currency and foreign currency, deposit, loan and investment guarantees, payments
and foreign trade, finance, remittance, Forex trading, distribution and payment
cards, traveler's cheque, homebanking, internet banking… In addition to the

services of a commercial bank, NASB is participating in the business of travel and
hotels, to contribute capital to the companies. During the period from inception until
now, NASB has received flags of the Prime Minister, the Governor's award of the
SBV operations and flags of Nghe An province. NASB is one of 10 banks chosen to
participate in the payment system automatic inter-bank.


After 18 year of operation, NASB has expanded and upgraded network of
branches and transaction offices, including:
1 Operations Center, 16 branches and 44 transaction offices nationwide
Originally established as a specialized bank serving external economic
activities, NASB today has grown into a universal bank with presence in all major
cities and provinces of throughout the country. A wide range of diversified products
were offered so as to maximize customers’ satisfaction.
NASB – Thai Ha branch was established 1996. NASB-Thai Ha branch is one
of the branches-level 2 of the NASB Hanoi. Being located in the critical area of
Hanoi, NASB-Thai Ha branch has moved a large amount of profit to its
headquarters in Hanoi. On 9th January 2006, the SBV and Board of Directors of
NASB signed the decision No 0113014556to upgrade the branch-level 1 under the
business. Process from its inception and is constantly evolving, now NASB -Thai
Ha branch is one of the branches of a significant level 1 of NASB system. NASB
-Thai Ha branch executes main functions in fund mobilization, lending, and
guarantee.

3.1.2

Organization structure, function and task of each department

3.1.2.1 Organization structure