BOT’s personal loan measures positive move: Moody’s
The Bank of Thailand's measures to limited personal loans are a positive step for banks because they will strengthen lenders’ underwriting standards and moderate personal loan growth - a contributor to high-level household debt and an increase in non-performing loans, Moody’s Credit Outlook said on Monday
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On Wednesday, the BOT announced a series of measures aimed at tightening personal unsecured lending, including credit limits for credit card holders with a monthly income of less than Bt50,000, and reducing the maximum credit card interest rate to 18 per cent from 20 per cent. The measures take effect on September 1.
According to the BOT’s 2016 Financial Stability Report, household debt was at 79 per cent of gross domestic product in the first quarter.
The report said while debt growth was slower in 2016 than in 2015, it outpaced income growth, especially for low income, agricultural households and households operating small and medium-sized businesses.
The new limits are designed to discourage further leveraging from these borrowers, and ease their debt-servicing burden.
Moody’s said the banks set to benefit the most from the new regulations are CIMB Thai and Bangkok Bank, which had the highest growth rates in personal and credit card loans in 2016.
CIMB Thai, in particular, will benefit because it has the highest share of these loans in its portfolio, it said.
The new income-based credit caps will limit banks’ exposure to these higher-risk loans, it said.
“We expect loans to small and midsize enterprises (SMEs) and unsecured personal loans, which are mainly issued to SME owners for business purposes, to remain weak spots in the system, despite a recovery in exports and [the] stabilization of household leverage that point to gradual improvements in broad economic conditions,” Moody’s said in a statement.
“Personal and credit card loans accounted for about 9 per cent of Thailand’s systemwide loans at the end of March 2017. These loans historically have poorer asset quality relative to secured banking loans. Credit card loans had an NPL ratio of 4.1 per cent at first-quarter 2017, while personal loan NPLs were 2.8 per cent.”
