It could take time for the country's swelling household debt to drop as consumers accumulated it over a number of years. But commercial lenders have already tightened their loan approval process, says Bank of Thailand spokesman Chirathep Senivongs Na Ayudhya.
Household debt rose to 10 trillion baht or 83.49% of GDP in the second quarter from 82.7% in the first quarter and 77.3% in 2012. Family debt has ramped up rapidly, especially for low-income earners, triggered by the previous government's tax refund scheme for first-time car buyers.
Mr Chirathep's comment syncs with Kasikorn Research Center's recent estimate that household debt will climb to 85% of GDP by year-end, possibly reaching 86-87% next year.
Moody's Investors Service said earlier Malaysia and Thailand were most vulnerable to rising rates due to high overall indebtedness and a rapid pace of credit accumulation in recent years. High household debt in the region poses a risk to private consumption growth and banks' asset quality, but it is manageable, it said.
Mr Chirathep said commercial banks had overly sufficient loan-loss reserves to mitigate rising non-performing loans (NPLs), resulting from the sluggish economic conditions.
"NPLs have increased moderately, but the rate has no significant implication," he said.
The 11 SET-listed banks set aside loan-loss provisions of 60.64 billion baht as of September, up 11.14% from the end of 2013.
For the first nine months, commercial banks' NPLs outstanding jumped 10.66% from the end of last year to 309.09 billion baht. The ratio rose to 3.09% of the industry's total credit from 2.7%.
Finance Minister Sommai Phasee said the ministry would soon permit interested investors to apply for nano-credit licences. Lenders can provide loans of up to 120,000 baht per borrower, while the ministry expects to impose a maximum interest rate of between 30% and 36% per annum.