Krungsri Consumer, the consumer-finance arm of Bank of Ayudhya and a major player in unsecured lending, has tightened its criteria for personal loans to both existing and new customers in an effort to prevent bad debts. It will also concentrate more on th
Krungsri First Choice borrowers now need a minimum monthly income of Bt10,000 to qualify for a personal loan, up from Bt8,000. Credit limits will also be tightened.
Thakorn Piyapan, managing director of Krungsri Consumer, said the company had found that the debt-to-income ratio of personal-loan borrowers had been on the increase. Raising the minimum monthly income requirement might not be enough to keep debts from going sour, so the company needs to cut back on credit limits as well, not only for new customers but for existing clients too.
“Previously, the company might not have checked with the credit bureau about existing customers who asked for additional personal loans, but now we have to, because people’s debt-to-income ratio has been rising to significant levels. As a lender, we should beware of this situation and reduce our activity in the personal-loan segment,” he said.
Krungsri First Choice lending used to grow by double digits per year, but this year, Krungsri Consumer has set the growth target for personal loans at less than 10 per cent.
Outstanding personal loans at Krungsri Consumer amount to Bt60 billion. Outstanding credit-card debt is also Bt60 billion, and Krungsri Consumer will be more active in this segment by offering zero-interest instalment payments on goods cardholders buy. Amid the economic slowdown, the instalment programme is a good choice for consumers, while merchants want to sell their goods, so the company will use this zero-interest strategy as a key campaign to boost credit-card spending.
Instalment purchases account for 20 per cent of total credit-card spending at Krungsri Consumer, a figure the company projects will rise to 25 per cent this year.
“We will offer long-term instalment plans with zero interest to our credit-card holders, as merchants are willing to subsidise the cost because this can help them sell their products quickly,” Thakorn said. He said Krungsri Consumer would start spending a lot on marketing campaigns to increase credit-card spending this quarter.
In the first quarter, such campaigns accounted for 60-70 per cent of the total marketing budget. But Thakorn said that might not have been enough.
“Credit-card spending in the first quarter expanded 8-9 per cent year on year, lower than the target of 15 per cent. We think the second quarter is a good time for serious campaigns with partners to achieve spending growth of 12 per cent.”
Krungsri Consumer will join with partners in all categories, especially Japanese restaurants and the travel industry.
It will also start serving Japanese people who are employees of Japanese companies in Thailand in the second half this year, cashing in on the merger of Bank of Ayudhya and the Bank of Tokyo-Mitsubishi UFJ.