Surging household debts unsettle central bank
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Lenders, credit bureau keep watch as NPL accounts hit 1.6m as of Dec 31
Thailand’s household debts last year rose 21 per cent from 2011 figures, prompting the Bank of Thailand to call for more financial discipline among households and individuals.
Suraphol Opasatien, president of National Credit Bureau Co (NCB), said: “Our database now covers 23 million debtors nationwide with a total of about 43 million accounts. In terms of households, the number is 18 million to 20 million.
“About 80 financial institutions use our database, and there were about 13 million creditworthiness checks last year, so the number of loan applications was around 1 million per month.
“Our latest figures as of December 31 show that 1.6 million of the 44 million accounts are now non-performing loans [NPLs], meaning the borrowers could not service their debts for three months or longer.
“In addition, 1.1 million accounts are being sued or are in the legal process with notices sent to recover the debts.
“Generally, one household has about five accounts, one for the housing loan, the second for the car loan, plus two credit cards and one more credit account for emergencies.
“Overall, 2.7 million accounts representing 7 per cent of the total are in trouble. The proportion of non-performing and other troubled loans is about 3-4 per cent of the total, or around Bt7 billion.
“The point is that these troubled creditors are lower-medium and low-income households with a monthly salary of Bt25,000 or less. The most troubled are those with a monthly income of Bt10,000 or less.
“Most of the 2.7 million troubled debtors owe money to non-bank lenders that provide personal loans to low-income earners. Many borrowers are factory workers who got the loans during the massive floods in late 2011 and afterwards could not pay them back because of less income resulting from overtime cut-backs or factory closures.
Auto
“Regarding auto leasing, there are about 5 million accounts, of which about 380,000 are now NPLs, accounting for 6-7 per cent of the total, including those [whose vehicles were] damaged by the 2011 floods and from the government’s first-car programme.
“In terms of financial discipline, the rule of thumb is that the servicing of outstanding loans should not exceed 40 per cent of a person’s monthly income. If you earn Bt10,000 a month, the most you should borrow is for a monthly payment of up to Bt4,000 covering all types of debts.”
Isara WongrungIsara, chairman of the Thai Hire-Purchase Association, said: “The NPL effects from the government’s first-car programme are not yet clear, since deliveries only started to build up last April. It will take a few more months to see how bad debts will evolve.
“Now about 500,000-600,000 of the 1.2 million vehicles benefiting from the government’s tax rebate have been delivered. Generally speaking, vehicle loans with low down payments and long payback periods are vulnerable.
“NPLs could be as high as 2-3 per cent, compared with the current average of more than 1 per cent, when the down payment is less than 20 per cent and the payback term is longer than 72 months.”
Rathien Sri-mongol, chief executive officer of Krungthai Credit Card, said: “Besides the credit-card business, which has no sign of trouble at this stage, we’re also in the personal-loans segment, and people with monthly incomes of more than Bt10,000 are our target group.
“We have about 600,000 personal-loan accounts but the NPL rate was 2.8 per cent at the end of 2012,” which compares with around 9 per cent on average based on the National Credit Bureau’s database.
“We generally offer a credit line of three times the monthly salary, but we have to ensure that borrowers do not have too many creditors. We regularly check with the NCB about the borrowers’ status before we approve new loans. Usually, we prefer that we’re not the third or fourth lender.”
