A Study On Loan Delinquency Caused By Retail Banking Customers

In recent years, as a result of considerable profit, strong risk diversification and positive market prospect, China’s major commercial banks have paid increasing attention to the retail banking business.The rapid development and expansion of commercial banks’ retail business contributes increasingly to the profitability of banks. However, with the expansion of the business scale, the problem of loan delinquency begins to appear gradually. Non-performing loans result in negative impact on bank profitability and bank’s return on assets declines as well. Therefore, the problem of loan delinquency must be attached importance to, in the purpose of promoting healthy and sustainable development of commercial bank retail business. The management should control risk in advance and reduce incidence of delinquent loans turning into bad loans.There are a variety of reasons causing retail banking loan delinquency issues, which mainly display in two aspects, the banks’ management omissions and customers’own problems. The two main types of reasons can be subdivided into several categories, during which, many can be avoided. It is crucial to do the research and take prevention measures accordingly. At present, commercial banks’ operating agencies generally consider that the management of loan delinquency, in which invest large amount of manpower, material and financial resources, might not worth implementing, if retail delinquent loans are not forming into non-performing ones. Due to the subjective understanding and indifference, it is difficult to implement the system for banks to deal with delinquent loans. The amount of retail loan defaults has always remaining high. Because retail banking business at this stage develops rapidly and banks focus on how to expand the business and bring in new clients, less attention has been paid to the problem of loan delinquency. Preventive measures and the analysis of reasons of customers’ defaulting on loans are basically in a blank state.This paper studies the current problem of loan delinquency caused by retail banking customers, based on Bank B in A Province. By specific research and analysis, I propose some feasible suggestions and the solution to the problem of loan delinquency caused by retail banking customers targeted in Bank B. This paper introduces the overall situation of small enterprises and individual customers’ loan delinquency, aggregates data in accordance with the distribution of default behavior, the number of times of delinquent loans, and industry distribution etc, and analyzes specific reasons of loan delinquency for the small enterprises and individual customers respectively. This paper also points out three magnificent reasons of the small enterprise customers’ loan delinquency as follows, not standardized internal financial management, improper management of post-loan and cash flow liquidity tension. The main reason of personal loan delinquency of Bank B is that the income exceeds the cost of delinquency loss. In the following part, I put forward the corresponding solutions by detailed analysis of these causes. This paper also provides the plan of prior control and prevention for new retail customers’ loan delinquency. In the last part, I propose the solution for China’s commercial banks to the problem of loan delinquency in the process of retail business development.