A considerable increase in loan rejection rates at commercial banks is not worrisome while the proportion of bad auto loans remains steady, a senior central bank official said.
The rise in loan rejection rates could be the case of applicants having higher debt obligations while their incomes remain the same, assistant governor Salinee Wangtal said yesterday.
The upward trend is not worrisome and no intervention by the Bank of Thailand is necessary, she said, adding it is adequate to keep monitoring the situation.
Her comments followed media reports of a 20-30% increase in loan rejection rates from less than 10% in the past due mainly to rising household debts.
Auto and personal loans are areas of concerns as most low-income earners have already borrowed to buy cars under the government's first-time car buyer scheme, leaving them vulnerable to economic uncertainty.
The rejection rates of consumer loans could increase as debt obligations may exceed the debt servicing ratio set by commercial banks, said Ms Salinee.
Typically, commercial banks have set a debt-servicing ratio of each potential borrower at around 30-40% of his or her disposable income.
State-owned banks are generally more accommodating in their consideration.
She also commended commercial banks' response to the changing situation by shifting their focus to debt repayment ability from collateral value.
She said non-performing auto loans at the end of June remained steady at 1.6% of all auto loans outstanding, while overall bad loans rose marginally.
"The overall loan growth may slow down in line with the economic environment. It's usual to see consumer loans expand at a slower pace. The most important thing is that the NPLs of auto loans, a major market concern, did not increase," she said.
At the end of July, financial institutions' lending grew by 12.3%, slower than the 12.9% increase in June, to 14.02 trillion baht, according to the central bank's data.