Kasikornbank plans to hire private debt collectors and tighten its credit standard for unsecured loans in a bid to prevent rising non-performing loans (NPLs) among retail clients, said executive vice president Thawee Teerasoontornwong.
KBank has found that its current individual customers have more debt than those at other financial institutions, causing it to increase the frequency of credit record checks with the National Credit Bureau.
Overall, lower debt repayment among these customers also means the bank's loan-loss reserve needs to be increased accordingly, he said.
KBank has also decided to tighten its lending conditions for credit card and personal loan customers who are late payers, in a bid to pressure them into developing financial discipline.
"Credit card customers who are late payers will be limited to cash advances on their cards at 50 per cent of their credit limit, against 100 per cent currently," he said by way of example.
The bank's approval rate for credit cards has dropped from 60 per cent to 50 per cent, while approvals for personal loans have fallen from 50 per cent to 35 per cent, he added.
NPLs among retail customers in the first quarter climbed to 1.8 per cent from 1.6-1.7 per cent at the end of last year, due mainly to rising bad debt among personal loan and mortgage customers.
Retail customers have a higher debt-service ratio, especially mid-income people with a monthly income of lower than Bt50,000 (S$2000).
The high debt-service ratio of this segment is reflected in the upward trend of overall household debt in Thailand, said the executive.
The rising debt-service ratio means now is not a good time for the bank to speed up its loan expansion, as it will have more expenses in collecting debt, as well as needing additional loan-loss provisioning, Thawee said, adding that KBank might consider lowering its loan-growth target for retail banking this year to cope with the situation.
In the first quarter, lending from retail customers posted flat growth due to the bank's credit tightening.
KBank will instead shift its lending focus to upper-income people who have a monthly income of more than Bt50,000, he said.
Housing loans are safer for the bank because customers who buy a home will generally know their debt-repayment ability, especially those purchasing from leading property developers, he explained.
Meanwhile, Krungthai Card (KTC), a major player in unsecured loans, last week reported to the Stock Exchange of Thailand that it had hired an outsourcing company to collect debts, with the objective being to clear the expense of debt collection in compliance with Bank of Thailand requirements, said executive vice president Bucha Sirichumsang.
Although NPLs for credit card and personal loan customers at KTC are only 1.48 per cent and 1.3 per cent, respectively, lower than the market average, the company attaches increased importance to debt collection after seeing signs of a tighter financial situation among its retail customers, he said.
KTC this year is strongly promoting its personal lending - a category that poses a higher risk than credit cards - while the long holidays in April and May might increase the level of late repayment, he added.
The company must, therefore, closely monitor its customers' behaviour and use debt collection to defend itself against bad debt, said the executive.