Most financial institutions have tightened lending criteria for households on concerns over credit quality, reflecting higher risk to household stability, according to the Bank of Thailand's first-quarter loan survey.
The survey also indicated stable loan demand from large enterprises for the first time in five years due to the private sector’s investment slowdown.
This quarter, financial institutions expect to heighten standards for all types of household loans, which mirrors the possible increase in household stability risk.
Most financial institutions assessed demand for residential and credit-card loans to ease from the current level, reflecting the expected slowdown in the property market and unclear recovery of private consumption.
However, first-quarter demand for other types of household loans is tending to rise more slowly than the previous quarter, as consumers’ demand for necessities is expected.
Financial institutions’ standards for commercial loans, particularly loans to small and medium-sized enterprises, would be more stringent as worries rose of loan quality, as a result of the overall economic situation. More caution may be exercised for some operators in the tourism, hotel, property and textile industries.
The first quarter is expected to see higher demand for overall commercial loans, particularly SME loans. This reflects the likely improvement of private investment, which is in line with a survey finding an improvement in business confidence for investment in the next three months.
Financial institutions project demand for loans in the next period coming from such services as wholesale and retail, transport and warehousing, telecommunications and manufacturing for local markets. Examples are the automobile and parts, food and beverage, and construction-material industries.
The survey was conducted on 23 banks and 18 non-bank institutions, which provided 90.40 per cent of total loans in the system, in the fourth quarter of last year, when most financial institutions raised standards for all types of loans.
For residential loans, financial institutions put more stringent standards in place on concern over the economic situation and the residential-market slowdown. Tougher standards were also applied to credit-card loans on rising concerns over the impact from the economic slowdown and higher household debt.
Stricter standards were placed on other household loans for five straight quarters on increasing concerns over borrowers’ creditability, collateral, and the economic situation.
In the fourth quarter of last year, most financial institutions adopted more stringent standards for commercial loans by increasing margins for customers with risks, and non-interest fees as concerns rose on risk for each business and economic situation.
Demand for working capital increased from small and medium-sized businesses.
Demand from large businesses remained unchanged for the first time after consistent climbs since 2009. This reflects the likely slowdown in private investment and is in line with operators that adopted a wait-and-see attitude towards the economic situation and tapered investment, the survey said.