BANGKOK (Reuters) – Thailand’s central bank yesterday tightened controls on credit cards and unsecured personal loans, a move that should contain high household debt levels and could cut domestic consumption.
The measures, effective September 1, come at a time of concern about overspending by citizens and rising bad loans.
The rule-changes mean credit-card holders can no longer automatically get credit limits of five times their monthly incomes. From September 1, only individuals earning at least 50,000 baht ($1,492) a month can get a maximum spending limit of five times their monthly salary for credit cards.
At the end of March, Thailand’s household debts were 78.6 percent of gross domestic product, among the highest in Asia, although that eased slightly from 79.8 percent at the end of 2016.
“Thailand’s household debt has been high and may affect households and the economy in the long term,” Bank of Thailand Deputy Governor Ruchukorn Siriyodhin said.
High debt levels have already had an economic impact. They are one reason the central bank has not cut its benchmark interest rate for more than two years to try to lift Thailand’s sluggish growth pace, as such a move could raise household debt levels.
Credit card loans that became bad credits stood at 3.8 percent of all such loans at end-March, while those of personal loans were 2.9 percent.
Yesterday, Fitch Ratings said Thai banks continued to face asset quality pressure stemming from vulnerabilities in small-and medium-sized enterprise and unsecured retail loan sectors.
Currently, there are 6.7 million people holding 19.8 million credit cards, Mr Ruchukorn said.
The new rules cut the maximum credit card interest rate to 18 percent from 20 percent, she said.
New credit card applicants with a monthly salary below 30,000 baht can have a credit line of up to 1.5 times their income, and those with less than 50,000 baht income will get up to three times.
The credit line for new unsecured personal loan applicants with monthly income below 30,000 baht will be limited to 1.5 times their income, and they will be limited to three accounts.
Shares in market leader Krungthai Card, Thailand’s biggest credit-card issuer and a unit of Krung Thai Bank fell 5 percent on the credit-card changes. The banking index was off 0.11 percent.
Thai people started accumulating debts from a younger age, over a longer period, and of a larger amount, BOT Governor Veerathai Santiprabhob said last month, adding the high debt levels were a challenge for households and policymakers.