Krungsri Consumer has further tightened its lending rules for personal loans by lowering the credit lines of new borrowers in a prudent move after a deterioration in debt-servicing ability.
Thakorn Piyapan (centre), Krungsri Consumer's managing director, believes strong risk management will be needed as household debt soars.
The debt-to-income ratio of its customer base has surged to 60% from 40-50% as rising incomes cannot keep up with the increasing cost of living, said Thakorn Piyapan, managing director of Thailand's largest lender of personal loans.
The cut in credit lines, effective from the start of this month, is part of Krungsri Consumer's risk management to control non-performing loans.
Its bad personal loans stand at 3.3% of its total personal lending, which is 40-50 basis points lower than the industry average, and it aims to keep them at that level until the end of this year.
Thais' indebtedness has soared in recent years, due largely to the previous government's consumer-driven economic stimulus and the higher cost of living.
The country's ratio of household debt to GDP rose to 82.7% at the end of March from 82.3% at the end of 2013 and 77.3% at the end of 2012.
An unsecured lender of personal loans, Krungsi Consumer is a subsidiary of the Bank of Ayudhya. With business spanning credit cards to personal loans, the unit has enlarged its debt-collecting team with 200 extra staff over the past two years to 1,100 to handle potential increases in bad loans.
Even though the economy is improving, strong risk management will continue to be a priority because high household debt remains a key concern.
In line with its cautious lending, Krungsi Consumer has lowered its revenue forecast for personal loans to 31 billion baht in the second half from the previous target of 35 billion. It hit its first-half target of 34 billion baht.
"Over the next few years, Krungsri Consumer will focus on credit card business rather than personal loans because it has been less affected by the troubled economy. Higher consumer confidence will also encourage spending via credit cards," Mr Thakorn said.
In the first half, Krungsi Consumer's outstanding unsecured loans totalled 115 billion baht, with personal loans accounting for 65 billion and credit cards 50 billion.
