Thailand’s Ministry of Finance on May 12 announced its decision to launch a credit card financing initiative that is raising concerns among key players in the country’s banking industry.
Under the scheme, the ministry is enabling the two state-owned banks, Government Savings Bank Ltd. and Krung Thai Bank Ltd., to offer cardholders with good records 200,000 baht (US$6,600 or 4,646 euros) to refinance their debt at a 10% annual interest rate, half the prevailing rate of 20%. Qualified cardholders have three to five years to pay off their debt.
A ministry spokesperson declined to comment, except to say the ministry designed the measure to improve credit access and market competition.
However, Prasarn Trairatvorakul, governor of the Bank of Thailand, said in a statement the initiative would be problem-free only if the government executes the plan efficiently and avoids undermining individuals’ financial discipline.
“Borrowers must be compelled to repay the [card] loans,” he said. “It should also ensure fiscal discipline is not undermined, as such market intervention could affect the fiscal budget.”
A senior official of Kasikornbank Ltd. was quoted in the Bangkok Post as saying his company’s overall credit card business would be affected by the program because it will lower interest income.
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