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Published on August 27, 2007

Borrowers are apparently losing their ability to pay debts, as reflected in significant increases in both new and re-entry non-performing loans (NPLs) in the second quarter of the year.

Gross NPLs rose by Bt97.25 billion, higher than the increase of Bt78.62 billion in the first quarter. The jump was particularly sharp in the manufacturing, commerce, personal consumption and service sectors, according to the Bank of Thailand.

In the second quarter, new NPLs rose by Bt63.97 billion, compared with an increase of Bt39.17 billion in the first quarter. The rise of re-entry NPLs was Bt24.25 billion, higher than the Bt16.79-billion jump in the previous quarter.

Analysts attributed the drop in debt servicing to political uncertainty and sluggish domestic consumption despite the trend of lower interest rates. Commercial banks also have been cautious about providing lending in general.

In the second quarter, NPLs in the manufacturing sector alone rose by Bt41.89 billion, compared with Bt22 billion in the previous quarter. NPLs in the commerce sector doubled from Bt9.87 billion in the first quarter to Bt18.35 billion in the second. Those in the consumption sector were up Bt13.36 billion, compared with Bt11.69 billion in the first quarter.

In the second quarter, existing NPLs fell by Bt75.75 billion while overall NPLs increased by Bt97.25 billion.

Reductions in the value of existing NPLs were seen mostly in the manufacturing, service and personal consumption sectors. The three sectors saw a decline in existing bad loans of Bt19 billion in total, slightly higher than the Bt18.73-billion decline in the first quarter.

Those in the service sector plunged Bt13.31 billion, compared with a drop of Bt5.9 billion in the first quarter. Existing NPLs decreased by Bt11.4 billion in the personal consumption sector, from a Bt8.7-billion reduction in the first quarter.

Anoma Srisukkasem

The Nation