Siam Commercial Bank (SCB), a banking business unit under SCB X Plc, has tightened underlying criteria on new loan approval to control asset quality amid higher risk.
Given the global economic slowdown and China's slower than anticipated economic recovery, exports are expected to contract this year.
Higher household debt following the redefinition by the Bank of Thailand and rising interest rates would also dampen consumer purchasing power.
In light of this scenario, the bank has tightened underlying criteria on new loan offerings to control asset quality, said SCB's chief executive Kris Chantanotoke.
SCB, the country's fourth-largest lender by total assets, would pay more attention to asset quality rather than growth because of the higher level of risk and growing economic uncertainty.
As a result, the bank booked total loan growth below expectations for 2023. However, the bank would keep its growth rate unchanged in the range of the low to middle level or not exceeding 5%.
"We may grow loans at low-edge growth rather than middle growth for the whole year in accordance with tightening risk management," Mr Kris said.
In addition, the bank has conducted stress tests more frequently compared with the normal situation in compliance with the central bank's requirements. However, most of SCB's customers are still able to repay their debt normally, and show no signs of incurring non-performing loans at a significant level.
He said SCB is not concerned about the household debt of the commercial banking sector, which represents around 10% of total household debt.
Meanwhile, specialised financial institutions represent the largest portion of household debt at 70%, followed by non-banks and other types of financial service providers at 20%.
SCB is ready to collaborate with the Bank of Thailand, the Thai Bankers' Association and other related parties to solve the household debt problem.
The central bank plans to stipulate three official guidelines on household debt management within this month, he said.
In addition, an interest rate cut for unsecured-revolving loans is expected to be the central bank's measure to mitigate the household debt problem.
The interest rates of loan products under the new measure are expected to be in the range of 8-12% per year compared with the ceiling rate of 25% at present.
Following the redefinition, household debt rose to 16 trillion baht, accounting for 90.6% of GDP.
Mr Kris said the bank has passed on the interest rate increase to customers in line with the central bank's policy rate hike.
However, the rising rate has not significantly affected the bank's vulnerable segments, representing a small proportion.
Moreover, the bank would maintain its financial support measures on a case-by-case basis.