Credit card and auto loans secured by individual borrowers aged below 25 and those living in major cities pose a higher risk to asset quality, says the central bank's think tank.
The two consumer loan segments are riskier because of the intensified competition that leads to lower asset quality, said Sommarat Chantarat, head of financial systems research at the Bank of Thailand's Puey Ungphakorn Institute for Economic Research (Pier).
Auto loan competition is greater among small banks and non-bank companies, while that of credit cards is seen mainly among large banks and non-bank financial institutions.
Borrowers aged below 25 represent 3.2% of the total number of borrowers, and their borrowing accounts for 1.1% of total loans.
Pier surveyed consumer loans extended by 90 financial institutions through National Credit Bureau's database during 2012-16.
The survey found that six financial institutions dominated consumer finance business, of which three were banks and the others specialised financial institutions (SFIs), as of July 2016.
Moreover, three financial institutions controlled 60% of the business loan segment.
Ms Sommarat said the intense competition has opened up consumers' access to financial sources at lower financial costs, but it comes at the price of lower asset quality, and most non-bank firms have focused on loan value by sacrificing asset quality.
"With the great competition, some financial institutions trade off an increase in loan amount against the lower asset quality," she said. "It also prompts customer acquisition from other financial institutions and provision of loans to customers with no financial readiness."
By customer segmentation, the survey found that all types of financial institutions -- banks, non-bank companies and SFIs -- had played a role in lending to borrowers aged less than 25.
The young borrowers aged below 25 had been targeted by these financial institutions as new borrowers.
However, delinquent debt per delinquent borrower among those younger than 25 averaged 43,183 baht, lower than for any other segment.
Debtors aged between 25 and 35 had the biggest ratio of soured loans at 20.2%, followed by those aged below 25 at 17.7%, the survey said.
Ms Sommarat said motorcycle loans posed the industry's highest risk of debt delinquency at 40% of total borrowers. These loans were largely extended by non-bank companies to farming customers.
As motorcycle loans had a smaller amount than other consumer loan products, they had no significant impact on the industry overall, Mrs Sommarat said.
"Despite the high delinquency rate of motorcycle debt, the business is still viable," she said. "Therefore, Pier needs to study and understand the nature of this business more."
In terms of financial institutions, non-bank firms and SFIs had a higher non-performing loan ratio than commercial banks.
The survey also found that the southern region had the highest ratio of bad debtors at 18.5%, while the North had the lowest at 13%.
