Research On The Management Of Bad Loans Of Rural Credit Cooperatives

Rural credit cooperatives have been playing a leading role in the financial system of rural areas since its establishment in 1951 in China. Its main business areas are in rural areas. It performs its duties according to the provisions of the national laws and financial policies and regulations. Its main responsibilities are to coordinate the management of rural funds, to guide and support rural production and comprehensive development, to support cooperative economy and member family economy from various channels, and to limit and combat usurious loans. In the past nearly 60 years, rural credit cooperatives have laid a solid foundation for the prosperity and stability of China’s rural economy. However, due to its backward management idea, improper internal management methods, the over intervention of local governments and other factors, the rural credit cooperatives have accumulated a large number of bad loans since twenty-first century. These bad loans not only make the rural credit cooperatives themselves very difficult to maintain a lasting development potential, but also have caused a huge negative impact on the local economic and social development. With more deepening and concrete reform of rural credit cooperatives in China, the negative impact of bad loans is gradually becoming more and more prominent, which has become one of the most important factors that restrict the sustainable development of rural credit cooperatives in China. It has become the most important in the reform of rural credit cooperatives to seek an effective mode of disposal of bad loans and reduce the burden of loans. Therefore, the study of how to manage the problem of bad loans quickly and effectively has great practical significance on rural credit cooperatives and the development of "three rural".In 2004,the state issued a deepening reform of rural credit cooperatives. According to the requirement, municipal and county Rural Credit Cooperatives which were up to a certain size of funds and asset quality standard reformed their organization forms. By restructuring, they established the rural cooperative bank and the higher level of rural credit cooperatives directly established rural commercial banks. Rural credit cooperatives and rural commercial banks all belong to the system of rural credit cooperatives, and rural commercial banks is the highest level of the system. The paper uses a combination of qualitative and quantitative analysis method to study the measure of Lanshan rural cooperative banks’ bad loans and have an in-depth analysis of the causes of bad loans. It consideres that the key factors of forming the bad loans can be attributed to three dimension, such as historical reasons, external reasons and internal reasons. Based on the analysis and summary of domestic and international commercial financial institutions’ experience to control bad loans, combined with the specific circumstance of Lanshan rural cooperative bank, the paper puts forward some measures for the governance of non-performing loans of rural credit cooperatives. First of all, the rural credit cooperatives should strengthen internal management, such as pay attention to internal communication, establish perfect customer credit rating system, standardize the loan program, strengthen the "double track" management and control mechanisms of non-performing loans, adjust the credit structure, innovate business model, strengthen the risk consciousness of credit staff and strictly evaluate the present value of non-performing loans to avoid unnecessary loss. Secondly, the rural credit cooperatives should strengthen the propaganda work to the loan object to improve their moral consciousness and legal awareness.