The rising number of bad loans on most commercial banks' balance sheets in the first quarter do not warrant much concern, given the banks' prudential management and hefty loan-loss provisions, says the Bank of Thailand.
Central bank governor Prasarn Trairatvorakul said the level of bad loans had climbed only slightly, plus banks had targeted only moderate loan growth, indicating cautious financial management.
Prasarn: Household debt not a problem
The central bank has also instructed financial institutions to set aside a substantial amount for loan-loss reserves when their profits are sound, he said.
"Banks' front offices remain cautious [in terms of providing loans and financial management], plus they have considerably high capital and loan-loss reserves, so there's no concern," Mr Prasarn said.
SET-listed banks posted a marginal increase in collective first-quarter net profit, as most had set aside higher loan-loss provisions to provide a cushion against the bad loan accumulation amid murky economic circumstances.
The rising NPLs have stoked concern by investors and securities analysts that banks may need to continue putting aside higher provisions, which could erode their profitability.
Swelling household debt is also not a major concern since the growth ratio of such debt has slowed considerably over the past year and a half, Mr Prasarn said.
He said households had run up debt in the past from renovations in the wake of the 2011 flood disaster and amid government stimulus measures aimed at boosting consumption.
Household debt is deemed an "end result" since the root causes of the indebtedness must be addressed through income enhancement and financial planning, Mr Prasarn said.
Household debt had swelled to 85.9% of GDP or 10.4 trillion baht at the end of last year from 84.7% or 10.2 trillion baht at the end of the third quarter, central bank data show.