KTC Increases Credit Card Loan Denials
Pandemic Reduces Loan Repayment Ability
Krungthai Card (KTC), a leading credit card provider, is rejecting an increasing number of credit card loan requests due to declining customers’ ability to pay off debt amid the protracted outbreak.
Currently, the company’s approval rate for new credit cards is about 36% of total loan applications, up from more than 40% previously.
“Given the higher credit risks, growing debt burden and lower ability to pay off consumer debt amid the impact of Covid-19, KTC is tightening approval procedures for new credit cards,” said Pittaya Vorapanyasakul, executive vice president of credit cards.
KTC mainly targets credit card holders with a minimum monthly income of THB 30,000 due to their higher purchasing power and lower credit risk in this segment.
However, the company also welcomes credit card loan applicants with a minimum income of 15,000 baht per month, but when granting a loan it mainly considers the applicants’ ability to repay the debt.
“Due to the continued impact of the epidemic and tightening of the approval process for new loans, we have not reached the new target for increasing the number of cards for the first half of this year, and it will be below the target for the full year,” she said.
In addition, outbreak containment security measures, especially social distancing, are another key factor in attracting new customers for the company.
The company plans to increase its base of new credit cards by 230,000 this year, but in the first half of this year it acquired 95,000 new customers.
The company has targeted an 8% increase in its customers’ credit card spending this year, of which it only achieved 4% growth in the first half of the year. It is possible that this year it will grow by only 5%.
He predicts spending on KTC cards will rise in the fourth quarter of the year, rather than in the third quarter as previously planned.
The company will focus more on online shopping in line with changing consumer behavior.
Despite higher risks and economic uncertainty, CPC controls NPLs at a satisfactory level.
As of May, the bad debt ratio on credit cards stood at 1.5%, up from 1.4% in March and lower than the credit card industry as a whole at 2.3%.
Ms Pittaya said about 14,000 KTC credit card holders are applying for central bank debt relief, which translates to a 1 billion baht outstanding credit card loan.
Customers have also adjusted their financial behavior as a precautionary measure amid the pandemic by spending a lower ticket size, down to less than 7,000 baht per transaction, up from more than 7,000 baht previously.