BoT tightens belt on consumer loans
Bank concerned about debt of young adults
The Bank of Thailand is set to announce tighter regulations governing unsecured loans next month as part of its effort to discourage consumers, particularly low-income earners, from accumulating further debt.
The central bank is conducting public hearings on the regulations, expected to be announced in the Royal Gazette in July, said Ruchukorn Siriyodhin, deputy governor overseeing financial institution stability.
The bank's latest move came after the Puey Ungphakorn Institute for Economic Research (Pier) found Thais have better access to personal loans than mortgages, but also tended to default more, especially younger borrowers. The report stated 17% of Thais take out personal loans, including 30% of first-time workers aged 25-35. Some 20% of first-time workers defaulted on their personal loans, above the 15% default average for all Thai debtors.
Reports from the National Credit Bureau and Pier stoked concerns because half of Thais aged 30 shoulder debts, most of which are personal and credit card loans. Moreover, one-fifth of Thais aged 29 failed to service their debts.
Soured credit card loans increased to 4.09% of the total outstanding at the end of March from 3.74% year-on-year, according to central bank data.
Mrs Ruchukorn said the regulations to be amended will focus on consumers who are at risk of default. She said the central bank is considering ways to ensure tougher regulations do not drive low-income earners to loan sharks.
"We've held several public hearings with financial institutions and these need to continue until we find a conclusion to this problem. Details of the regulations remain unclear right now," said Mrs Ruchukorn.
A recent report speculated the central bank would set the credit line for new credit cardholders at a range of 1.5 to 5 times salary or income, depending on their risk profile. The central bank presently requires a minimum salary of 15,000 baht a month to be eligible to hold a credit card, with a maximum credit line of five times monthly salary.
She said the central bank is focused on high-risk consumers to control the country's household debt, which remains around 80% of GDP, considered high. The central bank has implemented several measures such as financial literacy and debt clinics to alleviate household leverage, said Mrs Ruchukorn.
Supaneewan Chutrakul, senior vice-president of Kasikornbank (KBank), said KBank has had several discussions about proposals in the public hearings for revising the regulations, but none of them have been finalised.
Low-income earners have high risk regarding their debt-servicing ability and many have high household debt, said Ms Supaneewan. KBank provides credit lines for its cardholders based on risk profile, she said.
In related news, Finance Minister Apisak Tantivorawong said electronic payment would accelerate after credit and debit card-swiping terminals are completely installed at state agencies.
Installation of electronic data capture (EDC) devices at state agencies permits people to make card payments, which will increase debit card payments, he said.
Under the EDC pool -- part of the national e-payment scheme -- 18,000 terminals are to be installed at state agencies by this September.
The Finance Ministry's plan calls for 50% of the 560,000 machines to be installed around the country by the end of July and 75% by November, with the project completed by the end of March next year.
The ministry recently granted approval to two banking consortiums to install the 560,000 credit and debit card-swiping terminals. One consortium comprises Bangkok Bank and KBank, while the other -- Thai Alliance Payment System -- consists of five banks: Siam Commercial Bank, Krungthai Bank, Bank of Ayudhya, Thanachart Bank and TMB Bank.
Mr Apisak believes the banks can meet the installation deadline, though they are currently running behind schedule.
Since the EDC expansion scheme started in March, some 50,000-60,000 terminals have been installed.