Some banks pushing student lending

Typically, personal loans are high-yield earners for commercial banks, but they offer low interest rates to university students, as once they graduate and become white-collar workers, they could be long-term customers, said Krungthai Bank senior executive vice president Weidt Nuchjalearn.
Still, student loans are not a significant segment in KTB’s retail banking portfolio, he said.
Every bank aims to cross-sell products to its student customers rather than relying solely on interest income, because the interest rates charged to them are lower than for general consumers, as students have no monthly income.
KTB earlier focused on ATM cards, tuition transactions and payroll accounts by cooperating with universities, but the bank now is making its student loans more flexible as it plans to tap new students aggressively.
The state-run universities are adapting their administrative policies, which means tuition fees and education expenses might be increased, so personal loans could help relieve parents’ financial burden, Weidt said.
The new personal-loan programme for university freshmen will be launched next month in time for the new semester. KTB will focus on bachelor-degree students first as the credit-line requirement is lower than for those pursuing master’s or doctorate degrees.
Thanachart Bank, meanwhile, is targeting graduate students as well as superior educational institutions because of their high tuition fees, first vice president Chaturit Chantarakarn said
He said the bank launched scholar loans four or five years ago as it saw tuition fees represented a serious cost for families. Personal loans are a solution to help reduce parents’ burden as such loans do not require collateral. TBank views its scholar-loan programme as a kind of corporate social responsibility, as it offer special interest rates in the belief that education is a basic need for people.
The bank in cooperation with universities and specific academies, such as aviation institutes, grants 100 per cent of the tuition fee to borrowers, he said, noting that students in such places were potential customers once they enter the workforce.
“We do not worry about lending to students because the [partner] institutes help screen the good borrowers and the personal loans will be paid directly to the universities. Therefore bad loans from this kind of customer are zero,” he said.
TBank has seen annual double-digit growth of scholar loans.
According to the Bank of Thailand, lending to students by commercial banks last year amounted to Bt261 million, down by 12 per cent from 2011.
Pochanee Kongkalai, senior vice president of Bangkok Bank, said the low volume of loans for educational purposes indicated that commercial banks did not seriously promote student loans as they had to consider such factors as interest rates and the risks from debt collection. She said students themselves were also less interested in borrowing from banks than in accessing student loans from the government, because commercial banks were strict in examining the ability of borrowers to pay their debts. The targeted customers of commercial banks are graduate students who cannot get special loans from the government.
Bangkok Bank has personal loans for education as well, so-called Bualuang Poonphol Loans. The offered credit line is up to 90 per cent of the appraised value of the collateral but not over Bt6 million or 100 per cent of the value of the loan’s purpose.