The National Credit Bureau (NCB) has voiced concerns about the upsurge in delinquencies across all consumer borrowing categories by Generation Y, with personal loans the most worrying segment.
Although the ratio of new personal loan accounts opened by Gen Y in 2017 fell to 44% from 46% in 2016 and 47% in 2015, the number of new accounts increased to 1.43 million last year from 1.31 million in the previous year and 1.14 million in 2015, due to a larger base, said NCB chief executive Surapol Opasatien.
The total number of new personal loan accounts opened rose significantly to 3.25 million last year, from 2.84 million in 2016 and 2.41 million in 2015, he said, adding that personal loans do not require minimum payments, while the Bank of Thailand's recent move to tighten regulations on unsecured loans is only targeted at those earning below 30,000 baht a month.
According to the central bank's more stringent regulations, effective from Sept 1 last year, personal loans to those who earn less than 30,000 baht are granted at no more than 1.5 times monthly income per creditor, and those earning at least 30,000 baht are entitled to a maximum five times per creditor.
Those earning below 30,000 baht a month are limited to three personal loan creditors, while there is no restriction in terms of the number of creditors for those earning 30,000 baht and higher per month. In an emergency, borrowers can ask creditors for additional credit of up to five times monthly income.
Credit lines for new credit cardholders are capped at 1.5 times monthly income per card for those earning from 15,000 to under 30,000 baht a month; at three times for those earning from 30,000 to less than 50,000; and at five times for those earning 50,000 baht or more.
In an emergency, cardholders can still request a temporary increase in credit depending on their income.
Personal loans and credit cards are considered unsecured loans and have higher risks than secured consumer loans such as auto and mortgage loans.
But Mr Surapol said the number of new credit cards and personal loans clearly declined in the fourth quarter of last year after the central bank tightened regulations on unsecured loans.
"Personal loans are declining, curbed by these measures, but the question is how to deal with the existing debt," he said.
The NCB data shows that delinquent personal loans taken out by Gen Y borrowers continued to rise in terms of both account numbers and amount.
The overdue personal loan accounts of Gen Y exceeded 1.4 million last year, up from 1.2 million in 2016.
Soured personal loans amounted to 80 billion baht in 2017, up from 70 billion in the preceding year.
Gen Y in a familiar scene on the MRT. The millennials now have the bulk of personal debt, and 1.4 million of their loans are overdue. (Bangkok Post file photo)
The NCB's data in 2017 was based on repayment information from 97 members with 100.78 million accounts.
Gen Y is defined as those born during 1980-97. Gen X were born during 1965-79, and baby boomers were born during 1946-64.
Auto loans are the first type of loan that Gen Y borrowers default on when they have financial troubles, followed by personal loans and credit cards, Mr Surapol said.
For credit cards, the number of new credit cards issued last year fell to 1.75 million from 2.13 million in 2016 and 2.22 million in 2015.
But the ratio of new credit cards issued to Gen Y continued to increase to 56% last year from 53% in 2016 and 50% in 2015.
Non-performing loans (NPLs) of credit cards held by Gen Y jumped to 20 billion baht last year from slightly over 15 billion in 2016.
By accounts, nearly 500,000 credit cards held by Gen Y turned sour in 2017, up from just shy of 400,000 in the previous year.
The consumer NPL ratio declined to 6.9% at the end of last year from the peak level of 7.2% at the end of the third quarter.
But total debt restructuring still climbed to 540-550 billion baht at the end of 2017 from 150 billion at the end of 2014.
"This is alarming, as debt restructuring has grown more than four times over the past two years, while special mention loans, for which delinquency is 31-90 days, remain unstable, suggesting that NPLs are likely to peak around the second or the third quarter of this year," Mr Surapol said.
In the meantime, three applicants engaged in digital platforms are seeking nanofinance licences.
"They have completed digital platform like mini Alibaba, so they [those with licences] might offer loans for customers in their own ecosystem," Mr Surapol said. "They may need additional information from us in extending loans. Disruptive forces are coming faster than expected."
According to regulations, nanofinance operators must have minimum registered capital of 50 million baht. Nanofinance operating licences were first granted in early 2015.
Nanofinance operators can lend only for occupational purposes, with a lending limit of 100,000 baht per borrower and a ceiling interest rate of 36% a year.