The Bank of Thailand's imminent measure to put a three-lender restriction on personal loans to new applicants earnings less than 30,000 baht a month will take a heavy toll on lenders, says the head of Personal Loan Club.
The measures will hit personal loan lenders harder than credit card operators, said chairwoman Nayanee Peaugkham.
Each personal loan lender must adjust their own business strategy as the market will shrink, she said.
Personal loan borrowers with monthly income below 30,000 baht represent 70% of the segment. The cap on personal loan lenders is part of the central bank's new set of regulations governing credit card and personal loans, aimed at curbing overspending and controlling household debt.
According to the measures, which come into effect from Sept 1, those who earn less than 30,000 baht will be granted no more than 1.5 times monthly income per creditor, and those earning at least 30,000 baht will be entitled to a maximum five times per creditor.
Those earning below 30,000 baht a month will be limited to three personal loan creditors, while there is no restriction in terms of the number of creditors for those earning 30,000 baht and higher a month. In an emergency, borrowers can ask creditors for additional credit at a maximum of five times of monthly income.
For credit cards, credit lines of new cardholders will be capped at 1.5 times monthly income per card for those earning from 15,000 to less than 30,000 baht a month; at three times for those earning from 30,000 to less than 50,000; and at five times for those earning 50,000 baht or more.
In an emergency, however, cardholders can still request a temporary increase in credit depending on their income.
Even though the central bank sets the maximum credit line for personal loans up to five times monthly salary per creditor, lenders at the moment grant credit lines to their borrowers at around 2-2.5 times on average, depending on customers' risk profile, to comply with prudent lending practices, said Mrs Nayanee.
But the central bank found that young people are the major new borrowers of personal loans, pointing to risks down the road for the country's household debt burden, she said.
The industry's total personal loan portfolio stands at 335 billion baht, with the non-performing loan (NPL) ratio at 3.4-3.5%.
Currently, a minimum monthly repayment for personal loans is required at 5% of the loan principal, compared with 10% for credit card loans.
Mrs Nayanee, who is also managing director at Ayudhya Capital Services for its FirstChoice brand, said that the company will keep its minimum income requirement for personal loan applicants at 10,000 baht per month to open opportunities for this group to access funding sources.
"The Bank of Thailand's new regulations regarding additional credit lines for personal loan products in case of emergency will also prevent lower income earners from dealing with loan sharks," she said.
Separately, Thakorn Piyapan, chairman of Credit Card Club and head of Krungsri Consumer, the unsecured lending arm of Bank of Ayudhya, said that interest income for overall credit card business overall will decline by 10% due to the central bank's reduced ceiling credit card interest rate -- down to 18% per year from 20%.
The industry's credit card loan portfolio was 340 billion baht at the end of last year with NPLs at 2.9%.
Mr Thakorn said Krungsri Consumer will cut its target for the number of new accounts for unsecured loan products, covering credit cards and personal loans, to 700,000 accounts this year or 20% from the current target of 840,000.
The downward revision can mainly be attributed to the lacklustre economy, swelling household debt, the central bank's new regulations and its strategy to focus more on asset quality, he said.
The company has added 450,000 new accounts from the beginning of this year, of which 260,000 are credit cards and the rest are personal loans.