GSB takes up car title loans to keep interest rates low
Government Savings Bank (GSB) plans to enter the car title loan market with an emphasis on retail loans worth up to 200,000 baht per borrower.
The bank's penetration into the car title loan market is aimed at pressuring interest rates applied in this loan segment into declining, said president Vitai Ratanakorn.
The Bank of Thailand reduced interest rates for car title loans to 24% from 28% on Aug 1, but the rate continues to be high, Mr Vitai said.
GSB plans to cap car title loan interest at 18%, plus or minus no more than 2%. The 18% rate will be assessed based on customer profiles, Mr Vitai said.
For instance, a car with good conditions may receive a 16% interest rate, while older models or vehicles with risks attached could see 2% interest added on top of the 18% rate.
The 18% interest rate for car title loans, classified as an unsecured loan, is lower than interest rates imposed by non-bank firms.
But GSB can still make a profit because the bank's existing unsecured loan products have interest rates lower than 18%, Mr Vitai said.
Non-bank firms involved in car title loans have a net interest margin of 15-20%, higher than the NIM of 2% at state-owned banks and 3% at commercial banks, he said.
GSB is evaluating a potential joint venture partner in the car title loan business.