The Bank of Thailand is likely to lift the interest rate ceiling of 18 per cent for credit-card balances following requests from card issuers, a source said yesterday.

Relaxation of the rule will recognise the higher cost of raising funds in the credit-card business, the source said. Issuers have been asking the central bank to approve a higher ceiling since the end of last year because of climbing interest rates.

The BOT will formally announce the relaxation soon, the source said. The higher ceiling will only apply to interest on credit-card balances, which has been capped at an annual 18 per cent for years. Maximum interest rates for personal loans were set last year at 28 per cent.

Krungthai Card Plc's senior executive vice president, Thawatchai Thitisakdiskul, said all credit-card companies had reported their funding costs for the central bank's consideration. He declined to disclose his company's funding cost but said it had increased by two to three percentage points.

"It depends on the BOT whether the ceiling is raised and, if so, by how many percentage points. For the past two years, each issuer's funding costs has doubled," said Sukdee Chongmankhong, managing director of Krungsriayudhya Card Co Ltd and president of the Credit Card Club.

The relaxed rate ceiling is one of three proposals made to the BOT by the Credit Card Club. It is also seeking the relaxation of monthly payments, from 10 per cent to 5 per cent of outstanding credit for new cardholders, to help reduce their monthly repayment burden.

However, BOT Governor MR Pridiyathorn Devakula has said he will not allow card issuers to set monthly repayments at 5 per cent because this would double the loan maturity term and debtors would face a longer repayment burden.

Sukdee said the club had also asked the BOT to allow them to use the level of a customer's deposits as a criterion for credit-card approval instead of only their interest income. With low deposit interest rates, many depositors with high amounts on deposit have been unable to meet the interest income criterion.

"The amount on deposit should be a criterion for considering the issue of credit cards," he said. "I think the BOT will approve this because they've asked for more details."

Meanwhile, six commercial banks have reported an increase in non-performing loans (NPLs) in the second quarter, due to the economic slowdown. However, their loan-loss reserves remain higher than required.

The percentages of total loans represented by NPLs of the six banks, followed by the figure from the first quarter of this year in brackets, are: United Overseas Bank (Thai), 13.5 per cent (10.49 per cent); Siam City Bank, 3.16 per cent (2.53 per cent); Bangkok Bank, 11.2 per cent (10.94 per cent); BankThai, 6.14 per cent (5.06 per cent); Standard Chartered Bank (Thai), 3.07 per cent (2.88 per cent); and Tisco Bank, 4.67 per cent (4.31 per cent).

According to the BOT, banks' total NPLs as of June stood at 8.22 per cent of outstanding lending, up from 7.97 per cent in March.

Anoma Srisukkasem

The Nation