Thanachart Bank (TBank), the country's largest auto lender, has thrown its support behind potential tougher loan standards being considered by the Bank of Thailand.
Tighter auto loan measures will help standardise the industry, said Pompet Rasanon, executive vice-president of automotive lending.
"As a market leader, we want to create industry standards to build up fairness. If the central bank requires a standardised debt-to-service ratios [DSR] for either the borrower or the loan product, TBank agrees with this," he said.
TBank's auto loan borrowers' DSR averages 50% and it requires a minimum down payment of 15% for new car loans.
Auto loans are an area the central bank is monitoring because of strong demand and an increase in soured loans. Non-performing loans (NPLs) increased to 1.71% of the total at the end of March from 1.66% at the end of last year, while special mention loans -- loans overdue by more than one month but less than three months -- stayed elevated at 6.90% at the end of March, down slightly from 7.11% in 2018.
The central bank has launched a study of auto loans after lending for car purchases last year surged at a double-digit rate, the fastest pace in six years. The regulator has examined all areas of auto loans, especially loan approval standards, DSRs and promotional campaigns, to ascertain whether such lending is underpricing risks.
Auto loans expanded at 11.4% during the first quarter, compared with 12.6% for the entire year of 2018, according to central bank data.
Mr Pompet said if the central bank implements tougher measures to supervise vehicle loans, it would not affect the bank's auto loan business plan this year, given its stringent loan scrutiny process.
The bank aims for auto loans of 190 billion baht this year, of which 47.5 billion or 25% was extended during the first four months. TBank also targets seeing its car loan portfolio reach 450 billion baht by year-end.
Digital lending under the online-to-offline platform would also support the bank's auto loan expansion. Loan applications via the platform stand at around 10,000 per month, of which 5% are approved, he said. This approval rate is satisfactory for the initial stage of its digital service, said Mr Pompet.
For the first quarter, total car loans outstanding amounted to 433 billion baht, rising 13.7% year-on-year.
Moreover, the bank targets keeping a lid on auto NPLs at 1% this year, from 0.9% currently. Its auto NPLs remain controllable and have not showed signs of deterioration despite cooling economic growth.
With the longest auto loan instalment period at 96 months, borrowers' financial burden servicing the debt is not be too high, he said.
