Re-entries hit banks’ bids to curb bad loans

Credit bureau sounds alarm on thorny issue

Even though banks have managed to restructure a huge number of consumer loan accounts, re-entry non-performing loans (NPLs) are holding back efforts to bring down bad loans.

Re-entry NPLs are those that have been defaulted for a second time after being restructured.

The number of restructured consumer loan accounts soared to 5.4-5.5 million in the January-to-March quarter from 200,000 in the fourth quarter of 2014.

National Credit Bureau (NCB) chief executive Surapol Opastie said the rise in accounts of special mention (SM) loans, while soured loans remained steady, further highlights the re-entry NPL problem.

SM, defined as loans that have not been repaid for 31-90 days, are considered at risk of becoming NPLs.

The NPL ratio for consumer loans has held steady at 6.5% since the second quarter of last year, but SM accounts rose to 3.7-3.8 million, representing 3.7% of the total consumer loans at the end of March, from 3.5-3.6 million at the end of June last year.

Consumer loans under commercial banks represent the largest portion of total consumer loans extended by NCB members at 35.3%, while those of nonbank lenders stands at 31.9%.

The NCB has 95 members.

With high NPLs, consumer lenders have tightened new loan approvals, raising the rejection rate.

Given that consumer lenders prioritise controlling asset quality over loan growth, inquiries for credit reviews at the NCB have increased significantly over the past few years, Mr Surapol said.

Members’ equity for new loans at the NCB has continued to increase, to 42.2 million last year from 32.7 million in 2015, 28.1 million in 2014 and 16 million in 2013. For the three months to March, the number of inquiries stood at 13.6 million.

Number of credit checks by banks has held steady at 13.3 million during 201416. For the first four months, number of inquiries totalled 4.36 million.

Mr Surapol said 711,431 of the 3.32 million consumer loan borrowers aged between 29-35 failed to repay the debt.

Young executives aged 29-35 represents the largest number of the group’s borrowers at 3.32 million.

First-time workers aged 23-28 had 1.84 million consumer loan accounts, of which 379,168 are classified as NPLs. Student borrowers aged 16-22 are at 141,834, of which 17,209 are NPLs.

The Bank of Thailand recently voiced concerns about the rising debt and financial indiscipline of millennials.