Krungsri expects loan rejections
Krungsri Consumer Group, an unsecured lending arm of Bank of Ayudhya (BAY), expects that 15% of new loan applicants will be rejected after the Bank of Thailand’s practice guidance on capping a borrower’s debt-service ratio (DSR) at 70% for those earning up to 30,000 baht a month is adopted.
The lending guidance, expected to be adopted by banks and their subsidiaries in the fourth quarter, would also dampen demand for loans and cause slower lending growth in the second half than the first six months, chief executive Thakorn Piyapan said.
At present, the company’s customers on average earn 30,000-50,000 baht per month. Half of new customers have average income below 30,000 baht, 30% earn monthly income between 30,00050,000 baht, and 20% earn more than 50,000 baht a month.
“We’re ready to cooperate with the regulator, though our new loan applicants, especially for personal loans, could see a rejection rate of around 15% as their DSR exceeds the threshold at 70%,” he said.
The company’s customers have an average DSR of 40-50%.
The central bank has been in discussions with commercial banks for a while about a DSR standard, with an aim to control the country’s household debt ratio, which rose to 78.7% of the country’s GDP at the end of March from 78.3% at the end of last year.
“We aren’t worried that credit card usage will lead to an increase in household debt as most credit cardholders use the card as a substitute for cash, not like personal loans. Spending via credit cards is a change in spending behaviour,” said Mr Thakorn.
The company extended new loans amounting to 50 billion baht for the first half, pushing loans outstanding to 135 billion at the end of June. Account numbers expanded by 8% to past the 9-million mark.
The company’s credit card spending is expected to hit 330 billion baht this year after reaching 165 billion for the first half.
Krungsri Consumer for the six months had 479,000 new accounts — 45% from Bangkok and 55% from other provinces.
Of new accounts, 274,000 were credit cards and the remaining 205,000 personal loans. New credit cards surged by 34% year-on-year and new personal loans jumped by 32% during the six months through June.
The company aims to keep nonperforming loans level this year, with soured personal loans at 2.4% of loans outstanding and bad credit card loans at 1.1%.