BoT less pliant on credit cards

BoT less pliant on credit cards

The Bank of Thailand plans a credit limit for credit cardholders who earn 30,000 baht a month or lower of 1.5 times their salary. The central bank will further limit them to three plastic cards per person to rein in spending.

Apart from the restriction on the credit limit and number of cards, the new regulations, expected to be announced in the coming months, will cut the maximum interest rate charge on credit card debt to 18% from 20%, a source said.

The central bank's regulations currently cap the maximum credit line at five times a cardholders' monthly salary without a minimum requirement and there is no limit on the number of credit cards that can be issued to each cardholder. The minimum salary requirement for credit cardholders is set at 15,000 baht.

The bank's latest move came after the Puey Ungphakorn Institute for Economic Research (Pier) found that Thais have better access to personal loans than mortgages, but also tend to default on debt more, especially younger borrowers. The report stated that 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 more concerns because half of Thais aged 30 shoulder debt, mostly from personal and credit card loans. Moreover, one-fifth of Thais aged 29 fail to service their debts.

Soured credit card debt increased to 4.09% of total outstanding loans at the end of March, up from 3.74% year-on-year, according to central bank data.

Dan Harsono, head of retail and consumer banking of Bank of Ayudhya (BAY), said the central bank's tighter regulations on unsecured loans will take a toll on the bank's business starting from next year. He said the bank will need to adjust its business plan to seek more income from other sources such as fees and interest income to offset the missing revenue.

"Personally, I think [the tightened measures] will enhance borrowers' financial discipline as those earning no more than 30,000 baht should not spend too much. I would like investors to consider that all operators will feel the effects, not only BAY. We all need to adjust ourselves and BAY is working on the issue," said Mr Harsono.

He said that the bank's retail loan growth will hit its 7-8% target this year and is even likely to surpass that goal as loans expanded 3-4% over the past six months.

The strong retail loan growth could be attributed to the bank's subsidiaries, which are engaged in car refinancing, auto loans, personal loans and credit cards, he said.

Krungsri Consumer Group, BAY's subsidiary, is the country's biggest credit card issuer.

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