Krungsri Consumer, the unsecured loan unit under Bank of Ayudhya (BAY), has lowered the ceiling debt service ratio (DSR) for its borrowers with monthly income below 30,000 baht to 70% to brace for a subdued economic outlook.
People who earn below 30,000 baht a month have been adversely affected by the economic doldrums, with some of them losing overtime income, which deteriorates their debt-servicing ability, said Thakorn Piyapan, head of Krungsri Consumer.
The company started tightening criteria for both new loan approvals and debt collection this year, mainly because of the sluggish economy and regulatory factors.
The tougher requirement is expected to take a toll on business expansion for 2020.
"Lowering the cap on DSR to 70% will make us lose about 15% of new customers this year. Normally we acquire around 850,000 new customers per year," he said.
Previously, Krungsri Consumer offered different DSRs to borrowers based on their risk profile.
It offered a credit line to borrowers with monthly income below 30,000 baht based on their DSR at either above or below 70%.
New regulations, including the Personal Data Protection Act scheduled for enforcement from Jan 27, the new debt collection law implemented in 2019, and the central bank's market conduct should also decelerate business growth for 2020, said Mr Thakorn.
Krungsri Consumer aims for 8% growth in credit card spending in 2020, falling from a 10-11% gain in 2019.
The company also targets 6% personal loan growth in 2020, down from 7-8% in 2019.
Loans outstanding amounted to 145 billion baht, of which 69 billion were credit card loans and 76 billion personal loans, as of 2019.
The lender forecasts the non-performing loan ratio will climb higher to 2.4-2.5% this year from 2% in 2019 because of the sluggish economy.
Against the backdrop of gloomy prospects, debt collection needs to be tightened and the company has adopted artificial intelligence to let its debt collectors be among the first creditors accessing customers who are at risk of default.
Despite the tougher criteria on loan approval and debt collection, Krungsri has no plan to increase the minimum salary requirement of personal loan applicants from 10,000 baht a month currently.
Moreover, it still offers a zero-rate campaign for both credit cards and personal loans, but has shortened the debt instalment period, said Mr Thakorn.
A company survey found most customers select the zero-rate campaign with the longest period no more than 36 months, so the longer loan payment may not be needed, he said.