Thailand faces credit card default risks

Thailand faces credit card default risks (Photo:bangkokpost.com)

In the period, special mention (SM) loans, defined as those overdue by 30-90 days, surged for credit cards to 12 billion THB (325 million USD), up 32.4 per cent year-on-year and 20.6 per cent as compared with the last quarter of 2023.

According to National Credit Bureau (NCB) data, roughly 190,000 cards defaulted. NCB Chief Executive Surapol Opastien said that the increase in defaults can partly be attributed to the bank's decision to raise the minimum payment requirement for credit cards from 5 per cent to 8 per cent at the start of the year.

He noted that fragile economic growth, an uneven income recovery for individuals, and higher costs of living are expected to further strain the ability of credit cardholders to repay their debts.

During the pandemic, the central bank temporarily reduced the minimum payment requirement to 5 per cent to alleviate the debt burden on borrowers.

However, in January this year the central bank reinstated the minimum payment rate of 8 per cent, with plans to return to the normal rate of 10 per cent in 2025.

According to NCB data, as of March this year, total credit cards issued totalled around 24 million, with outstanding loans tallying roughly 550 billion THB, marking a 3.2 per cent increase year-on-year.

Meanwhile, non-performing loans (NPLs) for credit cards amounted to 64 billion THB in the first quarter this year, representing a 14.6 per cent increase year-on-year.

Surapol affirmed that with the notable surge in SMs for credit card loans, there is mounting pressure for higher NPLs in the country’s economy. Concurrently, more young people are applying for credit cards over the past few years

NCB data revealed roughly 36,000 new credit cards were issued in the last two years, with 23,000 held by millennials aged between 27 and 44.

According to a central bank statement, the regulator pledged to monitor the impact of the minimum payment increase, following a proposal from the Credit Card Club to postpone the rate hike based on concerns about the weakened ability of credit cardholders to repay their debts amidst an uneven economic recovery.

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