On the 15th June 2021 it was reported that…

The government has asked the central bank to review interest rates for credit cards and personal loans to try to tackle high household debt, the prime minister said on Tuesday…

“If our people still have a lot of debt and at a young age, it will affect their whole lives,” Gen Prayut told a briefing after a cabinet meeting.

Source: Bangkok Post

I do applaud the PM for his desire to help people…

But the logic used is rather amusing, perhaps the conversation within the government went like this:

  • “I am Prime Minister and can make anything happen!”
  • “P’ the mandate of a central bank is to be independent”
  • “Nein nein nein!!”

As a friend (hattip to KP) noted:

  • “Bear in mind, this is coming on the heels of two BoT facepalm initiatives, a) the attempt to get banks to give out debt forgiveness and b) asset warehousing, both of which were more or less ignored by the banks and non-banks.
  • The dumbest thing about this is that no-one who cannot afford to repay debt is paying anything at the moment.
  • Interest rate reduction i) will not help existing borrowers and ii) will lead to credit rationing to people who would otherwise we able to borrow.
  • You really have to wonder who is advising Prayut”

I do wonder how much better off consumers and corporates would be if the banking sector was fully liberalised to allow foreign banks to enter. Bank NIMs in Thailand are amongst the highest in Asia.

Anyways back to the PM being a central banker…Perhaps they forget that the BOT already cut the rates last year…

The BoT cut the ceiling rate on retail lending in Aug-20

 CurrentPrevious(before 1 Aug 2020)
Credit cards16%18%
Personal loans  
  – Revolving loans25%28%
  – Instalment loans25%28%
  – Auto-title loans24%28%
Nano finance33%36%

So then on the 24th June 2021 the Bank of Thailand Governor decided to remind the government that

“The issue in Thailand has been more in terms of access to liquidity,” particularly for small- and medium-sized businesses, rather than the level of policy rates, he said, adding that the bank is focused on easing those concerns.

Source: Bloomberg

Thus if there is any change in these rates the details on the firms that may be affected are below:

  • KTC’s portfolio comprises 66% credit cards and 34% personal loans. Its average yield was c.15-16% p.a., according to the company’s publicly available data as of 1Q21.
  • AEONTS’s portfolio comprises 52% personal loans, 41% credit cards, and 7% hire purchase. Its average yield was c.19-20% p.a.
  • MTC’s loan portfolio comprised c.70% auto title loans, c.10% personal loans, c.10% Nano finance, c.8% land title loans, and c.2% hire purchase. Currently, MTC charges c.15-18% p.a. for auto title loans and c.15% p.a. for land title loans.
  • SAWAD’s loan portfolio comprised c.48% auto title loans, c.42% land title loans, c.4% personal loans, and c.6% hire purchase. SAWAD charges 20-24% p.a. for auto title loans. Note that it charges higher than 15% p.a. for land title loans as the land title loan contracts will be under its subsidiary – BFIT.
  • TIDLOR’s loan portfolio comprised c.84% auto title loans and c.16% hire purchase. It currently charges 8-24% p.a. for its vehicle loans, depending on the vehicle securities.
  • KTB has c.24% unsecured loans, with an estimated yield of c.15% p.a.
  • TISCO has c.15% auto title loans, with an average yield of c.12% p.a.
  • SCB has c.13% unsecured loans, with an average yield of c.14-18% p.a.
  • KBANK has c.11% unsecured loans, with an average yield (for the whole retail portfolio, including mortgages) of c.5-7% p.a.
  • TTB has c.5% unsecured loans in its portfolio.
  • KKP also has c.5% unsecured loans in its portfolio.
  • BBL has an insignificant exposure to unsecured loans.

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