BBL cuts credit card's interest rate by 2%

"We recognise many cardholders have been affected by the difficult economic situation," said Bordin Unakul, executive vice president at BBL.

Other card issuers are considering whether to follow suit.

Bordin said the move follows the recent trimming of the bank's loan interest rates and was aimed at helping cardholders who were falling behind in their payments.

Rungruang Sukkirdkijpiboon, the executive vice president in charge of retail lending products at Siam Commercial Bank, said SCB had to weigh all the pros and cons of slashing its creditcard rate, now at 20 per cent, by 2 percentage points, out of concern for its margins.

Although interest rates are falling, leading to lower cost of funds for banks, risk is still rising in line with the economic crunch.

"During the past five months of this year, the bank was still effective in managing debt collections and nonperforming loans (NPLs), which are at around 2 per cent. But I'm not sure about the next seven months, so the bank must be confident about the capability of its risk management system such as debt collection and customer selection if the bank cuts the rate," he said.

About 70 per cent of the banks' plastic accounts always pay off their bills when due and 60 per cent of the bank's outstanding credit card loans of Bt20 billion are paid off in instalments.

An interest rate cut would not change the behaviour of customers such as from paying off their card in full to paying in instalments, or from defaulting to continuing to service debt.

Krisada Lamsam, an executive vice president of Kasikornbank, said the bank might not follow in BBL's footsteps as each bank has its own circumstances, customer behaviour and customer spending patterns. Risk still remains high amid the murky economic outlook.

Currently, 50 per cent of the bank's cardholders pay off their bills on time, while 30 per cent of credit card outstanding loans are pay by instalment.

The bank's credit card NPLs stood at 2.05 per cent, which was well below the target of 2.5 per cent for yearend, while the card base is expected to grow by 300,000 cards this year.

Thawatchai Thitisaksakul, senior executive vice president in charge of the card business at Krungthai Card, said KTC has not talked about the interest rate cut yet.

However, risk remains high and the default rate keeps rising along with the economic downturn, he said.

The issuer's NPLs are at 2 per cent, slightly increasing from last year.

KTC charges 20 per cent, as do TMB Bank, Siam City Bank, United Overseas Bank (Thai), Standard Chartered Bank (Thai) and Citibank, while Thanachart Bank charges 15 per cent.

Meanwhile, TMB Bank said it would slash its minimum overdraft rate (MOR) and minimum retail rate (MRR) by 25 basis points today to 6.50 per cent and 6.75 per cent, respectively.

The bank's minimum lending rate (MLR) remains unchanged at 6.25 per cent.