Kasikornbank (KBank) yesterday said it would not relax conditions on home loans to boost its consumer-credit business even though its rejection rate was rising.

"In fact, the bank wants to expand loans as much as we can, to achieve our loan-growth target. But loan approvals must also depend on risk-management principles, so the bank must balance loan quantity and loan quality," said president Prasarn Trairatvorakul.

The jump in housing-loan rejections mainly reflects the weakening debt-servicing capability of home-buyers amid the gloomy economic environment, he said.

The bank's credit-scoring methodology, which was adopted in the wake of the 1997 financial crisis, will remain unchanged.

"Once the economy slows down, people's earnings will be hit. Under KBank's credit-analysis criteria, a formula has been developed to compare a creditor's income and expenditures. If their ratio does not meet our standards, they'll fail to win approval," he said. Applicants who are eliminated by the automatic grading process may be considered by staff on an individual basis.

Developers have called for financial institutions to loosen their home-loan scrutiny, which they partially blame for the sharp drop in pre-sales.

Senior vice president Chatchai Payuhanaveechai admitted the bank was now throwing out about 30 per cent of all home-loan applications, up from about 20 per cent over the past several years.

From 2003-06, demand for credit-card and personal loans soared, and now consumers have less capacity to take on new loans, he said.

Also, outstanding personal loans have hit Bt200 billion, an increase of 21 per cent annually during the last three years.

"These data reflect lower capability for new making new loans. That means the increase in the loan-rejection rate is not caused by financial institutions, but rather depends on the borrower's status," Chatchai said.

Growth in the financial system's mortgages has slowed over the past five years. In 2004, 2005 and 2006, it was 22 per cent, 15 per cent and 10.7 per cent, respectively.

To promote its home-loan products, KBank is offering zero interest for the first three months for visitors applying at the 16th House and Condominium Show, which runs from today and to next Sunday.

Borrowers can choose one of six available interest-rate packages. The first charges a fixed interest rate of 3.5 per cent from the fourth to the 12th month. The second charges 5.75 per cent from the fourth to the 24th month, while the third collects 6.75 per cent between the fourth and 36th months.

The fourth charges the minimum lending rate (MLR) minus 3.5 per cent from the fourth to the 12th month, while the fifth charges MLR minus 1.75 per cent from the fourth to the 24th month.

The sixth charges MLR minus 0.75 per cent from the fourth to the 36th month.

All of the packages revert to MLR minus 0.25 per cent throughout the rest of the term.

Somruedi Banchongduang

The Nation