The write-off ratio also signals that households borrowing from non-banks have lower ability to repay debts than those financed by banks, according the central bank's inflation report.

The report said non-performing personal loans, although remaining low, had gradually increased since the second quarter of last year. This may show reduced capacity among households to repay debts.

Credit-card holders have also grown more wary of stretching themselves, as seen by the slow-down in credit-card loans provided by both banks and non-banks and the lower ratio of outstanding loans to card spending.

"Households have adjusted their behaviour by being cautious on consumption and borrowing. This is a good sign for economic stability but, meanwhile, it puts additional pressure on dampened spending," the report said.

Non-performing consumer loans at banks have continued to decline despite the economic slow-down. This indicates that households have not yet shaken the stability of the system.

Commercial banks' consumer loans account for 57 per cent of total lending to households, followed by specialised financial institutions with 36 per cent and non-banks with 7 per cent.

The Monetary Policy Committee noted that the property sector should be closely monitored to prevent a bubble from developing, which could spell trouble for future economic stability.

According to the inflation report, the risk of an overheated real-estate sector remains low because the slow-down in the sector resulted in a decline in property prices in the fourth quarter of last year.

The real-estate industry has continued the downward trend since then, due to weakened domestic spending and political uncertainty. Housing loans have grown slowly, as construction has declined in line with lagging demand, particularly for condominiums located downtown and near mass-transit lines and condos worth less than Bt3 million. 

Anoma Srisukkasem

The Nation