Lenders alerted to impact of slashed limit on credit card loans

Lenders alerted to impact of slashed limit on credit card loans 
  BOT MOVE MAY TRIM INTEREST INCOME BY UP TO BT900M FOR FINAL QUARTER
For the banks, the Bank of Thailand’s (BOT) decision will likely trim an average of 0.3 per cent off their interest-based income for the last quarter of the year, the Kasikorn Research Centre said.
However, it expects most operators will be able to handle any flow-on impact that arise from the new regulations, which will be imposed on new customers only from September. Most of the institutions have set credit limits for credit-card loans and personal loans that come close to those in the new regulations.
The research centre projects that commercial banks and non-bank financial institutions will achieve growth of 4 per cent in their personal loans business this year. The figure was 4.6 per cent for last year. 
For this year, the value of credit card loans is estimated to expand by 6 per cent. Last year, growth was 8 per cent. 
The revised regulations for credit card loans and personal loans will come into effect for new applicants for the loans from September 1.
Under the changes announced by the BOT, the reduced ceiling for interest charged on credit-card loans will take effect from that date for both existing and new card holders.
Ruchukorn Siriyodhin, BOT deputy governor for financial institutions stability, said the improved regulations would aid in the supervision of borrowings in the household sector at a time of easy consumer access to credit card loans and personal loans.
The measures reflect the central bank’s concerns over high household debts and the potential for the problem to have an impact on the broader economy in the long term.
From the start of September, people with a monthly income of less than Bt30,000 will be subject to a credit limit of no higher than 1.5 times their income for any credit card loans they take out.
Those with a monthly income of Bt30,000 to Bt50,000 will obtain a credit limit of no more than three times their income, while card holders earning more than Bt50,000 a month will be set a credit limit capped at five times their income.
The ceiling for interest charged on credit-card loans will be reduced from the current 20 per cent to 18 per cent per year. Under the original measures, those with minimum salary of Bt15,000 a month were entitled to credit limit of five times their salary. Some 19.8 million credit cards are in use in Thailand.
For personal loans, the credit limit for a person with a monthly income of less than Bt30,000 will be 1.5 times his or her income. Such applicants can gain personal loans from no more than three providers.
Those earning more than Bt30,000 a month will be subject to a personal credit limit of no more than five times their income, with no limitation on the number of personal loan providers.
The ceiling for interest levied on personal loans has been left unchanged.
The central bank will allow providers of credit card loans and personal loans to impose a temporary credit limit in emergency cases, with a fixed repayment schedule in line with a debtor's ability to repay.
The BOT reiterated that providers of credit card loans and personal loans must offer customers the choice to indicate whether they wish to be contacted about loan offers or other products.
The new regulations may have an impact on banks and other financial institutions which provide loans to the so-called Generation Y, said Kobsithi Silapachai, head of capital markets research at Kasikornbank.
 According to the central bank, household debt stood at Bt11.1 trillion in the first quarter of this year, equivalent to 80.6 per cent of gross domestic product. Among borrowers, those in their late 20s have a higher risk of loan delinquency, according to the BOT data.