Bank of Ayudhaya has raised the minimum monthly income requirement for new applicants for its First Choice personal loans to reduce the risk of bad credit.
Debt-servicing ability among people, especially low-income earners, has reportedly declined in the wake of the weak economy.
Through subsidiary Ayudhya Capital Services, which operates the Krungsri Consumer brand, the bank raised the minimum monthly income to 10,000 baht from 8,000 earlier for new applicants.
"The move is mainly to control asset quality of lower-income clients or First Choice borrowers," said Sukdee Chongmankhong, the chairman of Ayudhaya Capital.
The new requirement took place on Oct 1 after it found negative signs in debt-servicing ability in the segment. The goal is to maintain First Choice non-performing loans throughout the year at the current 2.6% of its total portfolio, up from 2.3% at the end of last year.
The 30-basis-point increase is higher than the industry's average of 20-25 basis points.
The requirement on debt service ratio for personal-loan borrowers is also raised to 70% of total income, while credit card clients remain at 50-60%.
"The negative signs in the segment are in line with the country's rising household debts," Mr Sukdee said.
It has also tightened debt collection for this segment by raising the frequency of debt collection calls for late-paying clients to 3.5 times per monthly statement cycle from three times earlier.
In order to do that, it hired another 100 debt collectors, bringing the total to 900.
For credit cards, another unsecured loan product, there have been no signs of bad debt thanks to the central bank's relatively high minimum income requirement of 15,000 baht a month.
Krungsri Consumer's total outstanding debts including credit cards now stand at 109 billion baht. They are expected to increase to 110 billion baht by year-end.
For the first eight months of this year, it attracted 555,000 new accounts, up by 9% year-on-year.
Currently, First Choice's total loan portfolio is 30 billion baht, and the stricter lending rules will not prevent it from achieving this year's target of 32-33 billion, Mr Sukdee said.