NESDC sees personal loans soar

NESDC sees personal loans soar

Report notes decline in credit quality

Bank staff are offering debt settlement consultations at an event in Bangkok in January. (Photo: Apichart Jinakul)
Bank staff are offering debt settlement consultations at an event in Bangkok in January. (Photo: Apichart Jinakul)

Personal loans have surged due to a shortage of personal liquidity while credit quality has diminished, according to the latest report by the National Economic and Social Development Council (NESDC).

The NESDC's report on Thailand's social outlook for the fourth quarter and overview of 2023 released on Monday revealed that households have delayed acquiring debt in nearly every type of loan, including mortgages and auto loans, with the exception of personal loans. This was partly due to financial institutions imposing stringent loan conditions in response to the declining trend in credit quality.

"Personal loans continued to grow consecutively, expanding by 3.5% in the third quarter, compared to 3.2% growth in the second quarter, reflecting the demand for financial liquidity among certain households, such as those whose income had not yet recovered or those facing emergencies requiring immediate expenses, debt repayment or credit card refinancing," said NESDC's secretary-general Danucha Pichayanan. "Personal loans are accessible and easy to obtain."

Concerning credit quality, data from commercial banks in the third quarter of 2023 showed a decline in credit quality across all types of loans. For consumer loans, non-performing loans (NPLs) amounted to 152 billion baht, rising by 7.9% compared to the second quarter of 2023, when it expanded by 2.7%. NPLs of consumer loans accounted for 2.79% of total loans.

Breaking down NPLs of consumer loans by purpose in the third quarter of the previous year, home loans, auto loans, credit cards and personal loans stood at 3.24%, 2.1%, 3.34% and 2.38%, respectively.

Given debts with arrears of no more than three months, which are not yet classified as non-performing loans (NPLs) but require special attention, also referred to as special mention loans (SMLs), the overall SML rate stands at a stable 6.7% of total loans, according to the NESDC report.

However, SMLs related to auto loans remain consistently high, aligning with the statistics of vehicle repossessions by the Federation of Thai Industries (FTI) in 2023, which increased to 25,000-30,000 vehicles per month, up from 20,000 vehicles per month in 2022.

In the third quarter of 2023, the NESDC reported household debt tallied 16.2 trillion baht, accounting for 90.9% of GDP. This represents a 3.3% increase from the same period last year, indicating a slower growth rate compared to the 3.7% expansion in the second quarter.

In a related development, the state's planning unit reported the labour situation in the fourth quarter of 2023 and throughout 2023 continued to improve, with working hours increasing and unemployment continuing to decline.

The employed population totalled 40.3 million, increasing by 1.7% from the same period last year. Employment in the agricultural sector expanded by 1%, while in non-agricultural sectors it increased by 2%, particularly in the hotels and restaurant sectors, attributed to a rise in foreign tourists. Simultaneously, employment in the transportation/storage, wholesale/retail, and construction sectors increased by 4.5%, 3.8% and 3.1%, respectively.

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