THEORETICAL BACKGROUND
Commercial banks and their sources of fund
Commercial banks play a crucial role as financial intermediaries in the national economy, emerging from the growth of manufacturing and trade As the demand for goods exchange rises between regions and countries, the necessity for currency exchange also increases This surge leads to the expansion of various banking activities, including payment processing and custodial services, which are essential components of credit activities within the banking system.
The State Bank of Vietnam, established on May 6, 1951, originally operated under a one-tier banking system suited for a centrally-planned economy However, with the transition to a market economy, this system became outdated, necessitating a reform to a two-tier banking structure comprising the State Bank of Vietnam and Commercial Banks Following Decree No 53/HĐBT on March 26, 1998, this unified system was implemented nationwide, allowing the banking sector to function under economic accounting principles and socialist business practices.
The Banking Ordinance No 38 - LTC / HDNN8, issued on May 24, 1990, defines a commercial bank as a currency trading organization that primarily accepts customer deposits These banks are responsible for repaying these deposits and utilizing the funds to provide loans, lend mortgages, invest, and perform payment-related tasks and discounts.
1.1.1.2 Banking activities of Commercial Banks
Banks are crucial for regulating and supplying capital to the economy In line with economic and social development, commercial banks offer a diverse array of services categorized into three primary groups.
The core activity of the banking system involves raising funds through various means, including accepting deposits, borrowing, and issuing securities Utilizing these mobilized funds, banks provide loans that stimulate production and support local and national objectives As the volume of funds increases, banks enhance their reputation, which in turn fosters stronger credit relationships with economic sectors, organizations, and individuals Therefore, commercial banks must align their strategies with the development goals of the country and local areas to effectively attract deposits.
Banks engage in direct profitable operations that significantly enhance their reputation and competitiveness in the market To achieve optimal capital utilization, each bank must carefully evaluate and implement effective strategies for managing their funds.
The primary function of commercial banks is making loans, which is crucial to their operations A bank's success hinges on the effectiveness of its credit plan and the overall performance of its lending policies.
Investing is crucial for commercial banks as they adapt to the evolving needs of society To effectively support the economy, these banks must stay informed and offer a diverse range of services Beyond traditional lending, they engage in investments, primarily focusing on two key areas: purchasing securities or investing in other companies, and acquiring fixed assets to enhance their operational capabilities.
Funding operations are crucial for banks, as profit remains the ultimate goal for any economic entity However, achieving this goal involves various factors, with safety being paramount Given the inherent risks in banking, banks must prioritize safety alongside lending and investing To ensure solvency and comply with central government regulations on required reserves, banks allocate a portion of their raised funds to secure their financial stability.
Commercial banks serve as vital financial intermediaries, offering customers numerous advantages, including efficient payment solutions for goods and services To enhance convenience and reduce costs, these banks provide a variety of payment methods, such as checks, payment orders, collections, and cards Additionally, they facilitate electronic payment networks and supply banknotes to meet customer demands, ensuring quick and accessible transactions.
On the other hand, commercial banks also conduct brokerage, trading securities for customers and, being dealers to issue securities for companies, underwriting services, Forex trading,
The interconnected nature of financial operations means that mobilizing decisions can influence fund utilization, while the demand for capital impacts the size and structure of mobilized funds Consequently, effective management of these factors is crucial for commercial banks to thrive and expand in today's competitive landscape.
1.1.2 Sources of fund of Commercial Banks
1.1.2.1 Definition of commercial banks sources of fund
Sources of funds refer to the monetary resources generated through the mobilization of activities by commercial banks, which are essential for investment, lending, and various business services These funds play a crucial role in governing all banking operations and are fundamental to the existence and growth of commercial banks.
1.1.2.2 Commercial banks sources of fund
Capital structure of commercial banks includes:
Equity, despite representing only about 5% of a commercial bank's total capital, is crucial for its operations This stability allows banks to utilize equity for multiple purposes, including investments in equipment, technical facilities, fixed assets, and particularly in venture investments.
The capital held by a bank serves as a safeguard for customers, ensuring liquidity even during financial losses It plays a crucial role in determining the size and volume of the bank's deposits, lending, and guarantee activities Additionally, the growth and size of a bank's equity are vital for its development capacity Equity consists of various components that contribute to the bank's overall stability and operational effectiveness.
+ Chartered capital: capital contributed by shareholders in a certain period This capital may increase or decrease in each period of time
+ Earnings: is the difference between net sales and extraordinary income minus union expenses and other unexpected expenses
+ Other Equity: is retained earnings or construction funds from the State budget to establish the bank
Deposits from the public serve as the primary funding source for banks, constituting over 90% of their total funds These deposits are considered liabilities for commercial banks, as they must be returned to the depositors in the future There are three main types of deposits that banks typically manage.
Fund mobilization in Commercial Banks
In any economy, there is a continual balance between surplus and deficit money Banks play a crucial role in managing this dynamic by utilizing various banking instruments and operations to raise funds and provide loans.
Capital mobilization activities play a crucial role in attracting idle funds from individuals and economic organizations through savings deposits, demand deposits, the issuance of deposit certificates, and bonds These operations not only serve as primary profit sources for banks but also help in attracting customers and enhancing the bank's reputation.
Mobilizing funds refers to the process of gathering unused capital from various organizations and individuals in diverse forms to generate operating capital for commercial banks.
- Raising fund from demand deposit
The bank will offer current accounts designed to fulfill the diverse needs of all account holders Demand deposits, which are non-term deposits, primarily facilitate payment transactions such as check encashment, fund transfers, and collections Additionally, enterprise customers will have the option to utilize an overdraft service on these deposits.
Deposits in commercial banks are considered unstable due to the constant demand for withdrawals by depositors Customers have the flexibility to deposit and withdraw funds at their convenience, prompting banks to maintain a significant reserve for these accounts Consequently, commercial banks typically offer non-term interest rates or no interest at all on such deposits While this method of mobilization can attract a large number of individual clients, the overall deposit amounts tend to be relatively small.
- Raising fund from saving deposits
Saving deposits are non-transaction accounts aimed at customers looking to reserve funds for future expenses or emergencies Typically, these deposits offer higher interest rates compared to demand deposits and are categorized into two types: time saving deposits and demand saving deposits.
A non-term deposit allows customers to earn interest on idle funds without committing to a long-term investment, offering the flexibility to withdraw at any time Banks are required to respond promptly to withdrawal requests, ensuring customer satisfaction Compared to current deposits, non-term deposits tend to remain stable for longer periods due to their non-transactional nature Interest rates for these deposits are typically set at the non-term interest rate, providing a reliable return for account holders.
Traditional time-saving deposits are a reliable funding source for commercial banks, offering customers a choice of terms and corresponding interest rates These deposits can only be accessed after a specified maturity period, allowing depositors to earn higher interest compared to demand savings Additionally, interest rates increase with longer maturities, providing greater returns for those willing to commit their funds for extended periods.
Commercial banks generally mobilize fund from economic organizations through demand deposits and saving deposits All operations are quite similar to services that are applied to individual customers
- Raising fund from issuing valuable papers
Valuable papers are financial instruments issued by credit institutions to raise capital, wherein the issuer commits to repaying a specified sum of money over a defined period, along with interest These instruments can include promissory notes, bonds, or certificates of deposit, each outlining the terms of principal and interest repayment.
Mobilizing funds through the issuance of valuable papers is an unconventional strategy for commercial banks, requiring a targeted approach tailored to specific objectives Each bank must develop a detailed plan that outlines key aspects such as the scale of funds to be mobilized, the methods of mobilization, the intended audience, deposit terms, issuance timing, interest rates, and payment methods.
- Raising fund from other sources
Apart from methods mentioned above, there are other important sources, such as payment capital, loans from other banks, entrusted investment funds
Sub-conclusion
Chapter 1 mainly focuses on fundamental definition of commercial banks, fund mobilization and mobilizing forms in commercial banks A general view of commercial banks’ sources of fund, such as equity capital, deposit and non-deposit are pointed out In addition, this chapter also illustrates methods that commercial banks can raise fund from; for instance, raising from saving deposits, raising from valuable papers and so on Chapter 1 provides the rationale for the next issue of the thesis According to this information, the evaluation of the reality of fund mobilization at the Bank for Development and Investment of Vietnam will be clearer and easier to be understood.
THE REALITY OF FUND MOBILIZATION AT BANK FOR
The establishment and development of the Bank for Investment and
BIDV - Ba Dinh branch was established on October 3, 2008, during a challenging period marked by a global economic crisis and domestic inflation, resulting in economic depression, particularly in export and investment sectors During this time, both mobilizing and lending interest rates experienced significant fluctuations in the market, with the basic interest rate showing notable variations in the last quarter of the year.
2008 had been adjusted five times, which adversely affected the business operation as well as customer relations of the bank
The BIDV - Ba Dinh branch, separated from the influential Quang Trung branch in Hanoi, benefits from a strong leadership team, well-established facilities, and solid customer relationships Despite these advantages, as of December 31, 2008, it reported a modest credit balance of nearly 6 billion VND and 12 billion VND in formal funds, primarily serving small and medium enterprises, resulting in a relatively small operational scale at its inception.
During these challenging times, the Branch has consistently received focused attention and direct oversight from all departments, particularly the Bank's Board of Directors As the Branch has developed its funding sources, expanded transaction offices, and invested in human resources, it has experienced significant growth in customer numbers, credit, and deposit amounts in recent years.
The Board of Directors and dedicated staff demonstrate unwavering solidarity and determination, working diligently to overcome challenges and achieve the targets set by the Head Office while aligning with the Branch's strategic objectives.
Overview of BIDV - Ba Dinh Branch:
- International Transaction Name: Joint Stock Commercial Bank for Investment and Development of Vietnam
- Address: No.57 Lang Ha Street, Ba Dinh District, Hanoi, Vietnam
- Website: www.bidv.com.vn
- Fields of operation: currencies trading, fund mobilizing fund, credit activity, banking services and other activities stated in the charter of the Central Bank.
The organizational structure of Bank for Investment and Development –
The organizational structure of BIDV – Ba Dinh Branch is divided into five Departments, nine Offices and five affiliated-transaction offices
Figure 2 1: Organizational structure of BIDV- Ba Dinh branch
(Source: Materials for interns from the General Planning Office)
Business performance of the bank
Basically, a commercial bank always operates three primary services as follows:
Table 2 1: The result of fund raising activity at BIDV - Ba Dinh branch from 2013 to 2015
(Source: Materials for interns from the General Planning Office)
In 2012, Vietnam's GDP growth rate hit a decade low of just 5.03%, yet BIDV – Ba Dinh Branch excelled amidst challenges faced by other banks The year 2013 marked a turning point in the 2011-2015 five-year plan, with the branch achieving an impressive growth rate of 22.09% Following the financial crisis, 2014 emerged as a beacon of stability, characterized by controlled inflation and restored growth across various sectors By 2015, the branch raised funds totaling 7,306 billion VND, reflecting a remarkable 47% increase from the previous year.
In recent years, fund mobilization has yielded initial successes, fulfilling proposed plans and progressively restructuring funding sources This has led to the effective utilization of capital and ensured that banks have adequate resources for their operations.
BIDV - Ba Dinh Branch is focused on optimizing its lending activities to boost overall business performance while managing credit growth The branch aims to enhance the quality of its credit investments by carefully selecting customers and ensuring compliance with credit conditions.
Figure 2 2: The growth of Year-end Credit Balance from 2013 to 2015
(Source: Materials for interns from the General Planning Office)
Table 2 2: Year-end credit balance 2013- 2015
(Source: Materials for interns from the General Planning Office)
After classifying types of, identifying risky ones, the bank had planned to settle bad debts in various measures As a result, the credit balance growth of the branch was controlled
In 2015, the year-end credit balance reached 7,200 billion dongs, more than triple the amount from 2013, due to effective measures and an expanded range of activities Enhancing the appeal of credit products through preferential lending methods for various audiences proved to be a successful strategy As a result, the loan structure increasingly favored private and consumer purposes, leading to a significant rise in income from credit operations, which doubled to 544 billion dongs compared to 2013.
- The quality of the credit operations of the branch is shown by the figures in the following table:
Table 2 3: The quality of credit operation from 2013 to 2015
(Source: Materials for interns from the General Planning Office)
Over the past three years, the ratios of bad debts and noted debts have experienced significant fluctuations In response to the challenging economic conditions of 2012, the Ba Dinh Branch prioritized debt management by temporarily setting aside credit growth targets to review and reassess all debts, focusing on controlling and addressing bad debts through provisions and ongoing monitoring As a result, in 2013, both the total credit balance and credit quality indicators improved substantially, with the non-performing loans (NPLs) ratio decreasing by 0.5% and the group 2 debt ratio dropping by 5.09%.
In 2014, the noted debts ratio saw a significant decline from 5.11% to 1%, continuing its downward trend in 2015 to just 0.03% Conversely, the bad debts ratio experienced a slight increase, rising from 0.55% to 0.57%.
With many outstanding efforts of the entire Branch, income from banking services in
2015 reached 32 billion dongs, more than nearly 10 billion compared to 2013 This is a result to be proud of the whole branch
Table 2 4: Situation of servicing operation at the branch between 2013 and 2015
(Source: Materials for interns from the General Planning Office)
The branch not only generates interest income from credit operations but also benefits from servicing activities, foreign currency trading, and other ventures Between 2013 and 2015, income from servicing operations displayed a positive trend, with a slight increase of 0.5 billion in 2013 In 2014, this income rose further by 3.4 billion, marking a growth of 15.04% Although this growth rate was lower than the 66.67% increase in expenses that year, the absolute increase in income outpaced the rise in costs, indicating effective expense management and enhanced operational productivity by the branch.
Currency trading has evolved significantly, aligning with the strategic management and business goals of the Bank over time The branch has effectively tapped into various sources of foreign currency, including purchases from dealers, corporations, and the interbank market, as well as utilizing Fund Transfer Pricing and self-balancing methods.
The Ba Dinh Branch has significantly improved its settlement activities, ensuring prompt fund transfers across the entire system Additionally, the international payment network has expanded, now representing 33.7% of the branch's operations.
The Ba Dinh Branch has significantly enhanced and broadened its underwriting activities, now representing 26% of its operations The bank provides guarantees for loan projects in key provincial industries while also diversifying into various sectors, including manufacturing, export, and environmental initiatives.
The Ba Dinh Branch offers a variety of services, including finance leasing and stock market operations However, these activities have only been introduced in recent years, indicating a need for further development and enhancement.
Current situation of fund raising at the Bank for Investment and Development
2.2.1 Fund mobilized in recent years
Through 8 years long of development, the Branch has grown continuously at high level With the starting point in 2008, after separating from Quang Trung the original branch, Ba Dinh branch has constantly strived to become first-class branch within the system despite the difficulties of being a fledgling
The Bank's fundraising activities primarily involve mobilizing funds from residents and corporations, along with issuing valuable papers and borrowing from its Head Office or other banks; however, these credit activities are limited and represent a small fraction of the total funds raised Therefore, this thesis will concentrate on analyzing fund mobilization specifically from residents and corporations.
Figure 2 3: Fund-raising activities between 2013 and 2015
(Source: Materials for interns from the General Planning Office)
Table 2 5: Fund-raising activities between 2013 and 2015
1 Fund mobilization from residents and corporations
(Source: Materials for interns from the General Planning Office)
In recent years, the annual fund mobilization has consistently matched the year-end funds raised, indicating the reliability of the Branch's fundraising efforts Over the past three years, the year-end funds raised have shown a steady annual increase of 700 billion VND.
In 2015, the Bank achieved a significant milestone with total deposits reaching 2,000 billion VND, reflecting stable and efficient fundraising activities This year marked a breakthrough for the Bank, as most deposits experienced growth exceeding 30% Additionally, the proportion of stable and durable savings deposits has increasingly risen, underscoring the Bank's strong performance.
2013, this type of deposit accounted for 43% and by 2015, the figure has reached 47%
The Branch prioritizes fund-raising as the cornerstone for ensuring the growth of business activities, leading to a significant increase in stable capital levels in both VND and foreign currencies Over the years, the Bank has focused on diversifying its capital-raising efforts through various methods and channels across all economic and social sectors This success can be attributed to the effective leadership of the Branch, the dedication of its professional staff, and a diverse range of fund mobilization products, coupled with competitive interest rates and strategic mobilization policies.
2.2.2.1 Structure of mobilized fund in terms of maturity
Table 2 6: Fund-raising activities sorted by terms of deposits between 2013 and 2015
(Source: Materials for interns from the General Planning Department)
1 Fund mobilization from residents and organizations
Figure 2 4: Structure of mobilized fund in terms of maturity between 2013 and 2015
(Source: Materials for interns from the General Planning Department)
In recent years, term deposits and savings deposits have significantly contributed to the total funds mobilized, representing 40% and 43% in 2013, 31% and 52% in 2014, and 31% and 47% in 2015, respectively This trend highlights the Branch's advantage of maintaining stable funding However, the high interest payments pose a challenge The bank's mobilization structure shows a growth trend, primarily driven by under-12-month term funds, while long-term funds exceeding 12 months remain modest, below 30% Notably, in 2015, despite a 1.5 times increase in funds raised from residents and organizations compared to 2014, long-term funds accounted for only 22% of the total mobilized funds from this sector.
Short-term fund always gains higher proportion over the past 3 years Financially considering, although fund from that source can increase the amount of interest, it is a
Savings Deposits more than 12- month maturity
Savings Deposits under 12- month maturity
Demand and Non-term Savings Deposits
A stable and secure option for long-term investment is essential, particularly as the State Bank mandates that commercial banks can allocate no more than 40% of short-term funds for medium and long-term loans This aligns with the growing trend of utilizing short-term funds for long-term investments The branch's objective is to sustain the growth of mobilized funds while effectively identifying and providing loans to customers in need of credit.
Term deposits and savings deposits continue to attract residents and organizations, highlighting the increasing reputation of the Ba Dinh district Branch The growth in long-term funding will enhance the bank's medium and long-term lending activities while mitigating liquidity risks associated with short-term deposits.
2.2.2.2 Structure of mobilized fund in terms of economic sectors
Figure 2 5: Structure of mobilized fund in terms of economic sectors between 2013 and 2015
(Source: Materials for interns from the General Planning Department)
According to data provided by the Branch in three years, the Bank has its strength in raising fund from the residents
In 2013, the majority of funds raised came from residents, comprising 49% of the total, while credit institutions contributed the second largest share at 35% The chart clearly illustrates the percentage changes in funding across different categories.
In 2014, the economy experienced positive changes, particularly within the financial sector While funds raised from credit institutions decreased by nearly 10%, contributions from residents surged by 54%, and those from corporations rose by 18%.
In 2015, the amount of fund raised from residents remained stable at 53% The Bank was more active in reducing the amount raised from credit institutions as the proportion was only 21%
The data indicates that resident contributions are the primary funding source for the branch, with a consistent growth trend over the past three years Additionally, corporate deposits are rising, reflecting the branch's strengthening relationships with businesses Conversely, deposits from credit institutions are gradually declining, suggesting that the bank is becoming more proactive in fund mobilization This shift is a positive sign for the sustainable development of commercial banks in today's economic landscape.
To enhance the quality of fund mobilization at a commercial bank, it is essential to expand the mobilizing scale and establish a balanced depositor structure Careful consideration must be given to whether the total deposits and the sources of fund mobilization meet the bank's usage demands The effectiveness of fund raising improves only when the mobilizing size and structure align with these demands.
2.2.2.3 Structure of mobilized fund in terms of currency
The fund-mobilizing structure categorized by currencies includes VND deposits and foreign currencies like USD and EUR, which are converted into VND For banks, optimizing the use of each currency while prioritizing cost savings is essential for enhancing the quality of fund-raising efforts.
The structure of fund-raising situation at Ba Dinh branch over the years is shown in the following chart:
Figure 2 6: Structure of mobilized fund in terms of currencies between 2013 and 2015
(Source: Materials for interns from the General Planning Department)
The Branch's mobilized funds predominantly consist of VND deposits, which have shown consistent growth annually In 2013, VND deposits reached 3,255 billion, representing 78% of the total funds By 2014, VND deposits increased by 1,000 billion, while foreign currency deposits decreased significantly to only 642 billion.
In 2015, significant advancements in fundraising were observed, with deposits in both categories increasing by 50% compared to the previous year This growth highlights the Branch's successful efforts to enhance local currency funding through strategic interest rate policies and a wide range of services.
Evaluation of fund mobilizing activities at BIDV – Ba Dinh branch
2.3.1 Analysis of mobilization effectiveness by criteria
In 2015, despite numerous challenges in economic integration, the bank successfully capitalized on opportunities, achieving significant advancements in finance, operations, and strategic implementation To evaluate the effectiveness of its fundraising activities, several key criteria must be considered.
- The stability of fund raising growth rate in terms of time and figure
Since 2012, BIDV – Ba Dinh Branch has consistently achieved high fundraising levels, with an average annual growth rate of around 25% In 2015, the total funds mobilized reached 7,306 billion VND, an increase of 2,366 billion VND compared to 2014, aligning with the bank's liquidity needs This growth was primarily driven by short-term deposits, reflecting a broader industry trend The branch's diverse product offerings and enhanced customer service have attracted an increasing number of potential clients, resulting in continuous fundraising growth that surpasses targets.
- The ability to afford business operations of mobilized fund
The Branch has been actively engaged in capital utilization, focusing on direct lending and transferring funds to the Head Office In 2013, credit debt represented 59.5% of total deposits by year-end, which rose significantly to 91.1% in subsequent periods.
In 2015, the loans and fund mobilizing ratio peaked at 98.55%, reflecting a significant increase in fund utilization and the bank's robust capacity to support its business operations However, to keep pace with the growing credit activities and investments of the branch in subsequent years, it is essential to enhance fund mobilization efforts.
The Branch has become increasingly flexible in setting deposit terms, offering weekly and monthly options to meet the diverse needs of depositors This diversification of terms enhances the Bank's ability to balance funding requirements and improve overall efficiency while effectively maintaining liquidity Additionally, the Bank prioritizes short-term deposits (under 12 months) to support medium and long-term investments while adhering to safety regulations.
- Fourthly, assessment on fund raising cost
The branch is actively adjusting interest rates to ensure they remain reasonable and aligned with positive market trends This strategy aims to strengthen the Bank's relationships with customers while boosting profits amid increasing competition and network expansion.
Between 2013 and 2015, average deposit interest rates were 5.3%, 4.3%, and 6.0%, reflecting a general decline despite an increase in total deposits, influenced by a trend of lowering interest rates The Branch adjusted its rates in line with proposals from the State Bank and introduced various deposit options, including Bao Loc savings and 13-month term deposits, to align with market conditions and enhance its fundraising capabilities.
- Finally, assessment on other criteria
Ba Dinh Branch has successfully attracted a growing number of potential customers through its diverse and modern services Consequently, the funds raised by the Branch consistently surpass the targets established by the Head Office.
The number of individual accounts has continued to increase rapidly, associated with the steady growth in these services This is also one of the highly profitable sources of
Ba Dinh Branch offers a range of electronic services, including Internet banking, SMS banking, and Mobile Banking, which provide significant advantages and clear benefits to customers These services enable users to easily and comprehensively access their banking information anytime, ensuring a seamless banking experience.
The Ba Dinh branch is renowned for its exceptional customer care, which significantly enhances client satisfaction and directly contributes to the bank's revenue growth By offering complimentary services, factoring, and continuously improving service quality, the branch effectively meets the needs of its regular clients.
2.3.2 Achievements from effective fund mobilization
The analysis indicates that the BIDV Ba Dinh branch has successfully mobilized and utilized funds, demonstrating significant achievements in fundraising activities Notably, the branch has maintained stable fund growth over the years, effectively supporting its business operations.
Deposits with terms under 12 months offer a range of appealing features tailored to meet diverse customer needs The variety in deposit terms, coupled with flexibility and engaging activities like sweepstakes and adjustable interest rates, has drawn significant customer interest and led to substantial deposit growth.
- Effective plans to exploit sources of fund
Each year, the BIDV - Ba Dinh branch establishes development and planning objectives, which are then assigned to its divisions This approach fosters greater autonomy and self-responsibility within each division, leading to positive outcomes.
- Sustainable growth in sources of fund raising
Mobilized funds are a critical component for commercial banks, and the effort to raise these funds is essential Recently, the BIDV - Ba Dinh branch has made significant strides in fund mobilization, achieving positive results The bank's funding sources have grown sustainably and diversified in their mobilization methods Additionally, the fund-raising structure has been gradually adjusted to increase long-term deposits, ensuring a stable funding source while attracting deposits from credit institutions, businesses, and individuals.
- Reasonable and stable fund raising structure
The Branch primarily mobilizes funds from resident depositors and credit institutions, although contributions from credit institutions are on the decline Meanwhile, the funds gathered from corporations remain modest but show a consistent growth trend over the years.
In terms of currencies, domestic currency deposits still account for a high proportion, in order to meet the demand for domestic currency of most customers
In terms of deposit terms, short-term funds are of large and increasing proportion over the years, comparable with current economic situation
Sub-conclusion
According to the theoretical background in Chapter 1 and the reality between 2013 and
Established in 2015, the BIDV - Ba Dinh branch has evolved into a reputable and comprehensive banking institution It plays a vital role in supporting economic entities by addressing their capital requirements, thereby significantly contributing to the processes of renewal, industrialization, and modernization.
In spite of recent formation, the branch has recorded great achievements; mobilized fund has increased gradually over years Especially, in the 3-year period from 2013 to
In 2015, the bank established itself as one of Vietnam's most reliable commercial banks, successfully raising 7,306 billion dongs and achieving significant success in credit and banking transactions However, the banking system has faced drawbacks, particularly in areas such as bank staff and customer services, which require urgent attention and resolution Looking ahead, the bank's mission is to identify its strengths and weaknesses to determine which aspects to promote and which to improve The following chapter will provide in-depth analysis and practical suggestions to enhance the bank's current situation.
SOLUTIONS AND RECOMMENDATIONS
Strategy to improve the effectiveness of fund mobilization up to 2020
To achieve its growth targets, the bank must enhance its operations to ensure security and efficiency This requires a comprehensive reform of its organizational structure, prioritizing customer focus and effective risk management Additionally, the bank should continuously strengthen its competitive advantages, diversify its business offerings, and improve both operational processes and risk management strategies.
Based on the comprehensive reform of the BIDV banking system outlined in Resolution 379/NQ-HĐQT dated May 16, 2012, along with the business plan announcement for 2015 to 2020 from Headquarters to the Ba Dinh branch, the branch has established its business targets for the next five years.
The scale of the branch:
- Total assets: continuing to grow at 18% per year
- Credit balance: growing at 24%/year
- Mobilized fund: growing at 19%/year
In the long-term period, Ba Dinh branch needs to carry out the plan of growth with extension, co-operation, as well as diversification
BIDV – Ba Dinh Branch aims to expand its presence throughout Hoan Kiem district while actively researching innovative banking services to cater to the growing needs of its customers.
Building strategic co-operation and alliances
To succeed in an increasingly competitive environment, businesses must focus on fostering strong relationships, particularly with strategic partners Collaboration with these partners is essential for sharing opportunities and enhancing competencies, ultimately driving growth and success.
On the basis of evaluating the growth and reformation strategy for the branch in 2015-
2020, the bank needs to complete the growth strategy, making Ba Dinh branch the most positively thrive in Hanoi and Vietnam in general
The branch must assess its current organizational structure to enhance self-improvement and align with future development needs, particularly in logical organization and risk management Additionally, it should expand its operations in traditional banking and investment banking to adapt to evolving customer demands, ensuring effective performance, long-term development, and sustainable growth In the coming year, the bank should prioritize its human resources strategy, emphasizing organizational management and human resource development.
Ba Dinh branch needs to make the efficient use of the advanced IT system, especially by investing into modules on business management, financing and human resources
To enhance its distribution channels, the organization must focus on expanding transaction points such as ATMs, POS systems, and internet banking Additionally, investing in innovative products and services, including internet transactions, switching systems, and banking card management solutions, is essential for growth and competitiveness.
What also needs to be done includes the quality improvement of services, professional standardization of the services and maintenance and development of its own business culture
3.1.2 Strategy to improve the effectiveness of fund mobilization
To effectively attract deposits in both VND and foreign currencies, banks must prioritize building strong relationships with their customers This can be achieved by increasing interest rates, boosting chartered capital, enhancing traditional accounts, and introducing innovative services Furthermore, careful consideration is essential during each share issuance period to raise funds and appropriately expand business operations.
Besides, the bank should diversify the types of deposit to adapt to the economic interest of customers, by varying the maturity date, preferred interest rates and so on
To effectively manage foreign funds, the branch must conduct market research, attract and establish credit accounts for various entities, including economic organizations, cooperatives, NGOs, joint ventures, international organizations, and foreign individuals Additionally, it is essential to facilitate foreign and domestic direct investments on behalf of the government and secure credit from other financial institutions.
Mobilizing activity is essential for daily business operations, significantly driving revenue and profit growth while maximizing the monetary value of owners' assets.
To enhance capital raising at BIDV - Ba Dinh branch, it is essential to consider the branch's capabilities, the socio-economic conditions, economic growth trends, and the development needs of BIDV.
- Total fund raised increased by 21%/year, including:
Credit institutions (excluding other banks) increased by 28%/year
Corporation customers increased by 18%/year
Individual customers increased by 19%/year
- Income from mobilization increased by 22%/year, including:
Net income of fund raising from credit institution increased by 31%/year
Net income of fund raising from corporations increased by 10%/year
Net income of fund raising from individuals increased by 22%/year.
Solutions to improve the effectiveness of fund mobilization at BIDV - Ba
3.2.1 Expansion and development of banking products and services
The growth of fundraising at BIDV – Ba Dinh branch is hindered by the lack of diversified deposit terms, limiting the bank's ability to offer a variety of assets with different liquidity options Consequently, this restricts the bank's capacity to provide a broad range of lending products compared to other commercial banks.
Expanding deposit options is essential for attracting customers and includes various types such as saving deposits, card deposits, bonus savings, accrued savings, and tiered savings Additionally, diversifying deposit terms beyond just non-term and fixed durations like 3-month, 6-month, and 1-year terms is crucial Branches should implement automatic transitions from non-term to term deposits, offering flexibility in term duration as an effective strategy to enhance deposit appeal.
The bank can enhance its deposit offerings to accommodate practical needs, such as allowing deposits at one location while enabling withdrawals at various transaction offices, facilitating single deposits with multiple withdrawals, or permitting numerous deposits and withdrawals By diversifying its fundraising channels, the bank effectively attracts idle funds from residents, particularly securing long-term deposits from state officials and employees.
Deposit with purpose is a strategic long-term savings option where both the bank and the client understand the specific goal of the deposit Typically, customers with low and stable incomes utilize this type of deposit, as they intend to allocate these funds towards high-value assets in the future By recognizing the purpose of the deposits, bankers can provide tailored recommendations regarding maturity and deposit methods, enhancing the overall customer experience.
To enhance client attraction, banks should explore various savings options, including phased savings and rewards-based savings programs By diversifying their deposit offerings, banks can appeal to a broader audience and increase customer engagement.
BIDV – Ba Dinh branch must effectively monitor and manage fund mobilization during specific periods and implement practical strategies to enhance their fundraising efforts.
3.2.2 Proposal of solutions for raising medium and long-term funds
The proportion of medium and long-term funds from resident accounts remains minimal compared to total deposits, while deposits from business institutions are experiencing a significant decline Despite efforts to foster strong relationships with certain enterprises, BIDV – Ba Dinh branch is encountering intense competition in fundraising activities, particularly from local banks and non-bank financial institutions, notably established commercial banks like Vietin Bank.
Vietcombank's Ba Dinh Branch prioritizes customer attraction and retention through targeted policies By categorizing customers, the bank can tailor its services effectively Longtime clients with substantial transactions and high deposit balances benefit from preferential interest rates and exclusive rewards, enhancing their banking experience.
To effectively attract deposits from diverse groups, banks must engage in strategic outreach through media and customer conferences Simplifying transaction procedures is essential to facilitate easy and quick transactions for customers Additionally, banks should categorize clients into distinct groups to tailor their marketing strategies based on varying spending habits.
3.2.3 Flexible application of interest rate policy
Interest rates play a crucial role in fund mobilization for commercial banks, particularly in attracting deposits from residents A flexible interest rate policy enhances competition among banks and boosts their operational effectiveness However, rising interest rates can lead to increased lending costs, making it difficult for businesses to secure loans and placing significant pressure on credit activities Therefore, BIDV – Ba Dinh branch should implement a strategic interest rate policy that attracts depositors while managing output rates effectively.
To maintain competitiveness in the market, the bank should increase medium and long-term interest rates while simultaneously lowering short-term rates to prevent an overall rise in average deposit rates Long-term interest rates must remain attractive within the price bracket, and the bank can utilize the bond rates of major banks to offer appealing rates Interest payments should be flexible, allowing options such as advance payments, monthly disbursements, and maturity payments, along with a progressive interest rate structure based on deposit amounts By adjusting interest rates for large deposits, the bank can effectively attract significant funds through these strategic interest rate policies.
In the upcoming years, when banking services have developed, payment services are modernized, the bank will not pay interest for non-term deposits in banks as foreign banks did
Medium and long-term deposits primarily serve to generate interest and meet essential human needs To promote these deposits, banks may increase interest rates However, it is crucial that the growth of expenses does not outpace the growth of mobilized funds to ensure that business results remain unaffected.
Customers who withdraw funds before maturity can benefit from tiered interest rates, while banks encourage longer deposit periods For instance, if savers initially plan to withdraw after one year but decide to keep their money for two years, the bank rewards this extended commitment with a higher percentage return.
To enhance fund-mobilizing activities, Ba Dinh branch should prioritize improving service quality and upgrading facilities for existing clients, in addition to attracting new customers.
An elegant transaction office enhances convenience and efficiency for both banks and customers Key features such as upscale facilities, a luxurious trading environment, ample parking, and dedicated consulting services play a crucial role in attracting clients By providing a secure and satisfying atmosphere, customers are more likely to engage in transactions, appreciating the blend of comfort and sophistication.
- The bank should improve customer care policies especially the ones who have a great balance by giving gifts on their birthdays, on holidays and major anniversaries
… Besides, announcing account balance, in due deposits makes clients feel they are cared about
Recommendations
To foster steady economic development, government authorities must effectively regulate the market to prevent abnormal fluctuations that diminish bank deposit values Such instability can undermine public confidence in banking, prompting individuals to shift towards alternative monetary transactions outside traditional banks.
The government, in collaboration with authorities, must leverage its power to establish a legal framework that ensures synchronization, clarity, equality, and stability, thereby safeguarding depositors' rights and fulfilling the collective aspirations of fund-raisers.
To enhance the competitiveness of the domestic banking system against foreign banks, it is essential to implement policies that support this sector A synchronized renovation and modernization of banking technology across all institutions is crucial for achieving operational efficiency However, these advancements necessitate significant capital investment Consequently, government support in funding solutions is vital for banks to upgrade their facilities and improve technologies, particularly in non-cash payment systems and other banking areas.
The government must foster a fair and competitive environment for banking service providers in Vietnam Currently, existing management mechanisms exhibit discrimination among these entities, leading to a lack of healthy competition This situation contributes to a stagnant banking services market, hindering growth and innovation within the sector.
3.3.2 Recommendations to the State Bank of Vietnam
The State Bank serves as a crucial macroeconomic manager in the financial and monetary sectors, acting as the banker for commercial banks It plays a vital role in establishing strategic economic directions and capital mobilization strategies to support the country's industrialization and modernization efforts In accordance with the State Bank Law and Credit Institutions Law, the SBV must develop comprehensive and coherent regulations and decisions to enhance commercial banking operations.
Inspection, testing, and strictly handling law violations on currencies and banking activities, especially for illegal fund - raising cases and unfair competitions between commercial banks should be improved
The State Bank must develop and execute a flexible national monetary policy that promotes savings and directs idle funds towards productive investments in business activities Additionally, it is essential to encourage fair competition among commercial banks while utilizing interest rates as a tool to support these objectives.
"leverage" to help the commercial banks focus on raising fund
SBV should enhance collaboration with foreign investment and fund management sectors, as well as governmental organizations and foreign NGOs, to effectively mobilize foreign capital into Vietnam through commercial banks.
To enhance the efficiency of card payment services, authorities should establish clear guidelines for the issuance and use of electronic payment methods, including debit and credit cards.
Commercial banks should be permitted to trade valuable securities, including bonds, stocks, and treasury bills, particularly focusing on long-term investments Additionally, providing preferential loans will help support commercial banks in modernizing their banking technology.
The State Bank of Vietnam must clarify the information and data that credit institutions are required to publicly disclose, aligning with international standards This initiative will enable customers to accurately assess banks and make informed decisions.
3.3.3 Recommendations to BIDV Head Office
BIDV should empower its branches with greater autonomy in business operations while clearly defining responsibilities based on the unique scale and characteristics of each branch To achieve this, it is essential to establish effective organizational structures and funding mechanisms that support investment projects, thereby enhancing the role and impact of each branch.
To enhance fund mobilization, commercial banks must innovate and diversify their methods, offering a range of products and services tailored to various customer needs Effective strategies include launching campaigns to encourage economic organizations and individuals to open personal accounts, promoting the use of checks, and fostering new financial habits while reducing cash reliance.
Developing an effective interest rate policy is crucial, as interest rates significantly influence a bank's fundraising activities To establish competitive and trustworthy offerings, banks must analyze market interest rate trends and provide reasonable rates for various products and services This approach not only fosters depositor confidence through stability and diverse interest payment options but also ensures depositor benefits and encourages long-term investments, rather than relying solely on higher interest rates.
A long-term training strategy is essential for developing the professional qualifications of officials and staff, particularly for leading officials at district and residential transaction offices, ensuring they are equipped for their responsibilities and aligned with regional banks Additionally, qualified young staff should be provided with opportunities for training and challenges Consequently, banks must prioritize staff development as a critical component of their business strategy.
Sub-conclusion
Chapter 3 outlines synchronized solutions aimed at enhancing the scale and quality of mobilization, building on the theoretical and practical foundations established in Chapters 1 and 2 Additionally, it offers recommendations for the State, the State Bank of Vietnam, and various banking institutions.
The article emphasizes the need to establish a robust legal framework that promotes business activities and specifically enhances fundraising efforts at the Commercial Bank for Investment and Development of Vietnam - Ba Dinh Branch This initiative aims to stimulate economic growth and attract investment in the region.
Recapitulations and Concluding remarks
As industrialization and modernization progress, fund mobilization has become crucial in the market economy, with commercial banks serving as the primary channel for capital allocation to economic entities This thesis aims to analyze the funding operations at the Bank for Investment and Development of Vietnam's Ba Dinh branch and to propose strategies for enhancing its mobilization activities.
The study identifies three key issues across its chapters, beginning with Chapter 1, which outlines the general landscape of commercial banks, their funding sources, and five primary methods of fund mobilization Chapter 2 focuses on BIDV – Ba Dinh branch, evaluating its recent fundraising activities, highlighting both achievements and shortcomings in an objective manner This assessment lays the groundwork for Chapter 3, which presents ten targeted measures aimed at addressing the identified limitations and offers recommendations for authorities to improve the branch's mobilization efforts.
Implications
In today's competitive market economy, commercial banks must develop effective strategies to secure adequate funding and enhance their outreach to stay competitive regionally A key focus is on maximizing domestic mobilization through diverse fundraising methods This paper aims to contribute to the BIDV – Ba Dinh branch and the broader Vietnamese banking system by addressing challenges and promoting successful fund mobilization efforts.
Limitations of the study and Suggestions for further study
Given the complexities and volatility of the banking money market, further research on fund mobilization is essential to enhance capital efficiency This graduation thesis acknowledges its inherent limitations and shortcomings, and I welcome feedback from my supervisor, Mr Ngo Tung Anh, and the faculty members of the Foreign Language Department to improve my research In the future, I aim to broaden my study to encompass not just fund mobilization but also other banking issues, fostering a more comprehensive understanding of commercial banks.