Credit bureau doesn't expect rise in bad debt

High levels of household debt are found among lower-income people bringing in less than Bt15,000 per month, a segment that is the main focus of non-bank lenders and providers of unsecured loans.

In general terms, however, the economic downturn has dented consumer confidence, causing a great many people to be more cautious about both their spending and borrowing.

Meanwhile, financial institutions have had to change their focus and increase the incidence of credit inquiries into existing borrowers to ensure that there is sufficient repayment quality to enable them to offer additional loans, according to the bureau.

People with a monthly income of more than Bt50,000 are becoming the "golden pot" for financial institutions.

The NCB’s financial-institution members have made more credit checks among this category during the past 12 months to ensure that it is safe to offer loans to this kind of customer, said NCB chief executive Surapol Opasatien.

While the debt-service ratio of people with a monthly income of at least Bt50,000 is limited to 40 per cent, as for other clients, the ratio for these higher-income earners is only 25 per cent, meaning that institutions have a chance to increase lending amid the economic downturn, he said.

People with a monthly income of lower than Bt15,000 have a debt-service ration of 60 per cent, which is well above the 40-per-cent limit, while those bringing in Bt30,000-Bt50,000 have a ratio of 34 per cent to 35 per cent.

Retired people form another focus segment for lenders, he added.

The NCB has also found that financial institutions are reviewing the credit situation of clients more regularly, from yearly or half-yearly previously to every quarter now, as they want to check whether they have built up additional debt with other mainstream lenders, which could affect their debt-repayment ability, he explained.

According to the NCB, household debt at the end of March totalled around Bt10.4 trillion, representing 85.9 per cent of gross domestic product.

Forty-four per cent of the amount was owed to commercial banks, and another 30 per cent to special financial institution.

The NCB has 82 financial-institution members, which have submitted 47.8 million active accounts to the bureau.

At the end of the first quarter, 38.7 million accounts were in a state of ‘normal delinquency’, up 0.5 per cent from the end of last year, while special-mention loans – those that were 31-90 days delinquent in the period – accounted for 1.22 million accounts, an increase of 1 per cent.

Non-performing-loan (NPL) accounts, or loans that were 91-days delinquent in the period, rose by 1 per cent to 4.2 million.

The slight increase in special-mention loans and NPLs reflects the tighter debt management of financial institutions, said Surapol.

The NCB chief said cash-advance cards and personal loans should be particularly closely monitored in the current economic environment, because the target customers for these types of lending are lower-income people.

Last year, the proportion of NCB members’ new personal-loan accounts increased among the Gen Y segment of those aged between 18 and 35.

The proportion of personal-loan Gen Y customers increased to 46 per cent, from 44 per cent in 2013 and 38 per cent in 2012.

Gen Y borrowers are very often first-jobbers, with a lower monthly income than Gen X customers aged 36 to 55.