THE Thai Bankers' Association (TBA) says that proposed official measures to impose more stringent conditions on personal loans will have only a limited impact on commercial banks and that they may help to improve the quality of their loan books.
If this resulted, the banks would have reduced loan-loss provisions, said Predee Daochai, the chairman of the TBA, while noting that personal loans made up only a small proportion of total loan portfolios. He said the banks would “adjust their operations to cope with the measures”, which are being explored by the Bank of Thailand.
“There's also the positive impacts. Later, customers will not overspend and this will improve quality of debt with reduced likelihood for bad debt, while banks will not have the burden of having to increase their provisions,” Predee said.
Personal loans held by Kasikornbank amounted to Bt20 billion, “a very small amount compared with its Bt1 trillion loan portfolio”, said Predee, who is also the bank’s president. If the central bank were to reduce the limit on personal loans from, for example, Bt50,000 to Bt30,000, the borrower may choose not to access all the funds available – regardless of what the prevailing limit is.
In regard to concerns that tighter lending conditions may spur an increase in informal borrowings, Predee said that the measures being considered would help make customers more aware of their financial limits and encourage prudence.
An anonymous source from a non-bank financial institution said: “We are waiting for certain regulations for non-collateral loans from the central bank which are expected in July or August before setting the direction to adjust our strategy”.
This year loan extensions have slowed down, the source said, adding that the measures would be positive for the overall market as they will control bad debt and build up more financial discipline among customers. Now, both banks and non-bank financial institutions have imposed more stringent conditions on approvals for new credit cards applications.
According to Krungthai Card Plc (KTC), about 44 per cent of applicants for new credit cards have been approved, down from an average of about 50 per cent in previous years. Spending on KTC's credit cards has slowed in almost all segments.
Adisak Sukumvitaya, chief executive officer at Jay Mart Plc, said that its subsidiary J Fintech will follow the central bank's regulation, if the loan ratio is cut to 1.5 times the income of a customer. Currently, J Fintech sets its loan amount at no more than three times a customer’s income.
“We can compete as we know our customers' behaviour. Now, the average loan is around Bt20,000-Bt30,000 per customer. This year, the bad debt rate is no more than 4-5 per cent,” he said.
Earlier, an anonymous source in the financial sector said that BOT held a meeting with financial institutions on June 28 and finalised directions to adjust regulations on credit cards and personal loans. They are expected to be announced on August 1. According to the source, the planned regulations are expected to set a credit-card loan limit of 1.5 times the income of someone on less than Bt30,000 a month and no more than three times for an income earner of more than Bt30,000 but less than Bt50,000. For personal loans, cash cards and zero per cent loans, an income earner of no more than Bt30,000 per month will likely be given a loan limit of no more than 1.5 times income, with no more than three cards.
At the end of first quarter, credit card accounts totalled 18.47 million, National Credit Bureau data shows .