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Banks, financial institutions not fretting over possible ban on 0% interest campaigns

Sep 23. 2019
Nanthawat Chotiwijit (File Photo)
Nanthawat Chotiwijit (File Photo)
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By The Nation

After the Bank of Thailand (BoT) issued new Sustainable Banking Guidelines with a focus on responsible lending last month, commercial banks and financial institutions are starting to reconsider their loan criteria, especially zero per cent interest on personal loans – one of the main reasons for consumers borrowing, living beyond their means and incurring debts.

Aeon Thanasinsub Thailand managing director Nanthawat Chotiwijit said his company is still awaiting clarity from BoT and commercial banks over the zero per cent interest campaigns.

“What concerns me is that the ban on zero per cent interest campaigns will constitute a diminishing of consumers’ rights,” he said. “Not all of these campaigns focus on luxury items, some involve necessary products or services, such as insurance, medical care and automotive parts.”

According to Nanthawat, mobile phones are the most popular product that Aeon’s customers buy using zero per cent interest. “The second and third most popular are IT equipment and electrical appliances, respectively, as these usually come under other campaigns, such as using points for discount, or cash-back promotions.

“When it comes to zero per cent interest, Aeon’s customers mostly have good discipline, with average monthly payment of less than Bt1,000,” he added.

Meanwhile, Pittaya Vorapanyasakul, executive vice president of credit card operations at KrungThai Card (KTC), said the zero per cent campaigns are responsible for only 10 per cent of the company’s total loans.

“KTC card holders on average have excellent repayment discipline, and our NPLs [non-performing loans] are currently very low,” she said. “We use strict criteria to determine loans based on each client's financial history and repayment capability,” Pittaya added

“Zero per cent interest campaigns are a good marketing strategy that helps customers make purchasing decisions easier. However, it is based on the condition that partner shops must be willing to cover the interest for customers,” she pointed out. “Currently, the most popular item bought under KTC’s zero per cent campaign is mobile phones.”

KasikornBank senior vice president Weerawat Pantawangkul said the bank may consider limiting the campaigns to support BoT’s responsible-lending policy.

“In the future, we will probably limit the campaigns for high-risk groups, such as earners of less than Bt30,000 per month,” he said. “However, most of our clients availing of zero per cent interest currently follow bank regulations and rarely contribute to NPLs.”

Weerawat added that for KBank, tour packages are the most popular under the campaign.

Meanwhile, Anisa Chuchan, assistant managing director of credit card operations at Siam Commercial Bank, said the possible ban on zero per cent interest campaigns should have a minor effect on the bank.

“The bank isn’t focusing on pushing more zero per cent interest campaigns on the market as most of our clients are in the high-earning group,” she said.

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