The Bank of Thailand's tightened personal loan regulations for those earning less than 30,000 baht a month has dealt a blow to Krungthai Card's (KTC) new customer growth.
The company's new personal loan customers averaged 10,000 per month from January to April, below the company's target of 12,500 a month, said KTC's vice-president Phichamon Jitpentham.
According to Bank of Thailand measures effective from Sept 1 last year, personal loan borrowers who earn less than 30,000 baht have been granted no more than 1.5 times monthly income per creditor and have been limited to three personal loan creditors. The central bank tightened controls on unsecured loans to put a lid on household debt and rising bad loans.
The stringent regulations have taken a toll on personal loan service providers across the board, as those earning below 30,000 baht a month are the largest personal loan borrowers. Krungsri Consumer, an unsecured-lending unit under Bank of Ayudhya, recently predicted that new personal loan account growth would be flat this year at 300,000.
KTC has 857,613 personal loan accounts.
Those with a minimum monthly income of 12,000 baht are the company's target group, as the segment has high growth potential with acceptable risks.
The bank expects to keep its non-performing loan (NPL) ratio at 0.82% from now until year-end, she said. The industry's NPL average for personal loans is 2.5%.
"The company's personal loan issuance has continued to grow after the central bank implemented tighter personal loan requirements, but it's slower growth. We need to continuously monitor the market to adjust our business strategy properly," said Ms Phichamon.
KTC plans to launch new marketing campaigns in the second half to achieve its outstanding personal loan growth target of 10% this year. As of March, the company's personal loan portfolio was 24.5 billion baht, rising 10% year-on-year.
Even though KTC's new personal loan customers fell short of the target, the approval rate for the loan product has been steady at 30% over the past several years.
But she said personal loan demand in the second quarter is still high because of seasonal factors.
Improving domestic consumption and rising purchasing power, in line with the economic recovery, will be a boon to personal loan demand, said Ms Phichamon.
The company is also paying more attention to digital channels for both loan applications and marketing.
Online personal loan applications make up 10% of the total. The bank will continue encouraging online applications by halving the interest rate for the first two months for customers who receive loan approval via the channel.
KTC shares closed Tuesday on the Stock Exchange of Thailand at 360 baht, down two baht, in trade worth 553 million baht.