Overdue loan numbers surge
The spectre of the financial crisis which rocked Thailand and much of Southeast Asia back in 1997 has faded with the years, but a recent surge in the numbers of so-called non-performing loans (NPLs) has given financial institutions a reason to rethink some of their policies.
The National Credit Bureau (NCB) recently released figures showing that the number of loans which were overdue by between 30 and 90 days had skyrocketed from 100,000 to 600,000. The rise in the cost of living, caused by an inflation figure which in some sectors is arguably higher than official government figures, is impacting heavily on the ability of people, especially on lower incomes, to service their debts.
Overall, the NCB notes that the number of NPLs stands at 1.1 million out of a total of 73 million accounts and this figure is considered relatively small and has been at around this level for the past three years. NPLs are expected to remain at about one percent of total loans this year, a level considered acceptable by financial institutions.
Nonetheless, a sudden surge in the 30-90 day overdue loan repayment schedule may see the total figure rise further in coming months, despite the fact financial institutions have employed more stringent risk management protocols since the 1997 crisis.
It is people on lower incomes of 10,000 baht or less per month who make up the majority of those with heavy debts and are falling into the NPLs bracket.
The NCB refers to overdue loans by the almost euphemistic term ‘special-mention loans’. Debtors who find themselves classified as thus find they are unable to use their credit cards and, naturally enough, face even tougher financial hurdles if they try to obtain further loans.
The NCB said financial institutions have been more frequent in requesting data on potential borrowers, reflecting a mood of greater austerity in terms of approving loan applications. In 2012 the NCB said financial institutions made 6.5 million requests for information on loan applicants. That figure has risen to 10 million this year.
In the meantime, banks are suggesting the slower economic growth forecast for this year is unlikely to have much of an effect on loan expansion.
In the first quarter of 2013 Thailand’s household debt stood at 77.5 percent of GDP or around 8.97 trillion baht. By comparison, during the 1997 crisis the figure was just 1.36 trillion baht or 28.8 percent of GDP.
The reduced economic growth forecast and the level of household debt were factors in prompting the Bank of Thailand’s Monetary Policy Committee to maintain its 2.5 percent policy interest rate in the belief this would stimulate economic growth.