NCB: Youth piling up debt
Figures show Gen Z's credit card buildup
The number of credit-eligible Gen Z applicants for credit cards increased significantly in the second quarter, suggesting that this generation is piling up debt, according to National Credit Bureau (NCB) data.
Most of Gen Z, defined as those aged 20-22, are first-time workers and first-time borrowers, said NCB chief executive Surapol Opasatien.
Although most are first-jobbers or university students, their qualifications meet the Bank of Thailand's requirements for minimum monthly income of 15,000 baht, as many earn income as online vendors, Mr Surapol said.
"Our data found rising numbers of loan applications from Generation Z, especially for credit cards," he said. "We need to monitor debt repayment capability and asset quality of the segment for another quarter."
The central bank recently flagged concerns over significant debt accumulation by Generation Y, aged 23-38, and tightened unsecured loan requirements for those earning below 30,000 baht a month to keep a lid on household debt and rising bad loans.
The central bank's Puey Ungphakorn Institution for Economic Research found that most debt owed by younger borrowers is to non-bank companies, while the elderly, who are classified as a vulnerable group by the Bank of Thailand, largely borrow from state-owned banks.
The central bank has also raised concerns that zero-rate unsecured loans and online shopping are motivating the younger generation to run up debt.
Nuntawat Chotvijit, executive director of Aeon Thana Sinsap Thailand, said the company will continue to offer zero-rate credit cards and personal loans for a specific period, saying the scheme is a financial instrument that helps customers manage liquidity and alleviate their debt repayment burden each month.
"Amid a cash crunch, the zero-rate campaign eases the financial burden of borrowers, especially lower-income earners," he said. "The campaign can help the lower-income segment in emergencies. For instance, a client whose washing machine is broken needs 6-8 months to save money to buy a new one, but our campaign enables them to buy a new one immediately."
Aeon Thana and other financial institutions have long offered such promotional campaigns, and the company can control asset quality at a satisfactory level using strong risk management, keeping the non-performing loan (NPL) ratio at about 3%.
Aeon Thana also complies with the central bank's regulations for unsecured loan services. Borrowers who earn less than 30,000 baht a month are the company's key customer segment.
Monthly income of 10,000 baht represents the company's largest customer base for personal loan products, and such clients are offered a credit line of up to 1.5 times or 15,000 baht as set by the central bank, Mr Nuntawat said.
Thakorn Piyapan, head of Krungsri Consumer Group, said the Thai Bankers' Association's credit card club is gathering information on zero-rate marketing campaigns to discuss the matter with the central bank soon.
The information includes borrowers' occupations, consumer behaviour, family sizes, education and residence locations, Mr Thakorn said.
From the preliminary data, new graduates appear to be requesting several types of loans, such as credit cards and auto loans.
Banks will assess their behaviour and debt-servicing ability because over-borrowing could result in NPLs, Mr Thakorn said.
He voiced support for the central bank adjusting the debt-to-service ratio (DSR) to encourage consumers to refrain from overspending.
Bank of Ayudhya will start adjusting its DSR in early 2020, beginning with credit cards and instalment payment cards.
The move could reduce the number of new customers applying for these card segments by 15%, resulting in lower consumer spending, Mr Thakorn said.