Krungsri ready to accept higher risk of unsecured loans

Krungsri Group is confident enough in its strategy and expertise in consumer finance to offer more high-risk unsecured loans.

"From our internal study, very small business owners want liquidity to prepare inventory or to expand, while white-collar workers want reserves for unexpected situations. The target groups are operators at the Chatuchak Weekend Market and the Platinum Fashion Wholesale Mall," president Philip Tan said yesterday.

According to the 2013 business plan unveiled last month, Krungsri Group can accept a rise in non-performing loans (NPLs) to 2.5 per cent from 2.39 per cent last year, so the bank has room to expand its high-risk products such as unsecured loans, he said.

The bank yesterday introduced unsecured loans with attractive conditions for very small business owners with minimum sales of Bt20,000 per month and white-collar workers with minimum salaries of Bt15,000 per month.

The maximum loan is five times a customer's monthly income or Bt1 million. Borrowers can select from instalment loans or revolving credit lines. Interest is charged at 20-28 per cent based on credit quality and loan size.

The bank realises that it cannot control the proposed use of the loan proceeds of each customer, but it can monitor the cash flow of customers for three to six months before deciding to approve a loan.

"If customers require a credit line of Bt1 million, they have a specific objective, while we're confident in our collective capabilities, otherwise the bank's NPLs would not have declined to 2.39 per cent. The lower NPLs mean an opportunity to grow," he said.

The bank targets Bt14 billion from new loans of this kind this year. Assuming growth in Thailand's gross domestic product of 5.5 per cent, the personal-loan market should expand at about three times that, and Krungsri must keep up with the market, Tan said.

Krungsri Group last year enjoyed spectacular loan growth of 61 per cent to Bt16.37 billion. The unusual performance was partly due to HSBC's credit-card and personal-loan portfolio that it acquired in late 2011. Excluding the HSBC portfolio, Krungsri Group met the target of 37 per cent, he added.