Central bank warns of rising bad loans from credit card debt refinancing
May 24 2011
Source : MCOT
BANGKOK, May 24 Bank of Thailand (BoT) Governor Prasarn Trairatvorakul on Monday advised the government to consider categorising credit card debtors for refinancing by state-owned banks with caution to prevent a rise in problem debts.
Speaking of a proposed plan to refinance credit card debt by the Government Savings Bank, Krung Thai Bank, and the Islamic Bank of Thailand, he said he thought the plan would not affect the credit card system greatly because the proposed refinancing is in limited amounts.
However, Thailand's banks must have efficient tools to monitor and categorise credit card debtors. Otherwise, it might lead to an increase in non-performing loans.
The state sector, however, should intervene in the private-sector business performance at an appropriate level and control risks efficiently.
It should not attempt to nurture a culture of incautious credit card spending because it can do more harm than good. Actually, it should let the market mechanism work on its own, said the BoT chief.
Kasikornbank Chief Executive Officer Banthoon Lamsam said commercial banks are not in a position to reduce credit card interest rates in a similar manner to state-owned banks which are instructed to do because they must protect benefits of their shareholders.
Unlike the state banks, Thailand's commercial banks cannot make sharp interest rate cuts because they must bear the higher financial costs.
Frankly speaking, he said, the refinancing of debts should be allowed to function in accordance with the market mechanism.
Mr Banthoon said he believed the plan to refinance credit card debts would be used only in the short run. (MCOT online news)