State banks' refinancing scheme set to start on June 1

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CREDIT CARDS
State banks' refinancing scheme set to start on June 1
By WICHIT CHAITRONG
THE NATION
Published on May 24, 2011

State banks will start providing credit-card-refinancing loans on June 1.

"The banks are [also] considering refinancing cash cards issued by non-banks," Finance Minister Korn Chatikavanij said yesterday.

Krung Thai Bank, Government Savings Bank and Islamic Bank of Thailand (IBank) will next week offer Bt10 billion in new credit for the refinancing scheme, which Korn officially launched.

Each credit-card holder could get up to Bt300,000 as a clean loan with an interest rate of 10 per cent - much lower than the 20 per cent or so charged by commercial banks for revolving credit.

The three state banks will allow cardholders to repay their refinancing loans in one to three |years.

Applications to the scheme will be open from June 1-August 30.

Successful applicants have to commit to the banks that they will not incur new debts for at least one year.

Areepong Bhoo-chaoom, permanent secretary at the Finance Ministry, said about 13.69 million credit-card accounts showed outstanding credit balances totalling Bt241.88 billion as of March.

Normal accounts numbered 12.1 million with outstanding debts of Bt173.8 billion. Special-watch accounts totalled 91,468 with outstanding debts of Bt3.98 billion - debts overdue by up to three months. Bad or non-performing accounts - overdue more than three months - numbered 1.4 million with outstanding debts of Bt64.1 billion.

The refinancing scheme covers only performing accounts as of April 30.

The state banks are also making preparations to refinance debts owed to non-banks.

Low-income earners usually apply for cash cards or personal loans from non-banks, while those earning Bt15,000 and up are usually given credit cards by banks.

The National Credit Bureau has raised the alarm that many borrowers might not be able to repay personal loans because of the rising cost of living.

Gorgiat Wong-aree, executive vice president of IBank, said the bank was ready to offer refinancing of personal loans.

"Currently we have a personal-loan product with a profit rate [interest rate] of 14.5 per cent," he said.

IBank has combined credit-card and personal loans of Bt3 billion, he added.

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Central bank warns of rising bad loans from credit card debt refinancing
TNA 2011-05-24

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)