The Bank of Thailand is preparing to raise its regulatory oversight of non-bank financial institutions, or non-banks, of which there are more than 3,600, after finding that loans grew rapidly from 280 billion baht to 470 billion baht in just five years since 2021, accounting for roughly 55% of total system credit and growing at an average of 12% per year. Mr. Vitai Ratanakorn, Governor of the Bank of Thailand, said the central bank will examine licensing and interest-rate charging in three areas: operators holding multiple types of loan licenses, credit cards whose holders have long made only minimum payments, and vehicle title loans. It found that some operators hold a personal loan license, which caps interest at 25%, and a nano finance license, which caps interest at 33% for occupational purposes, yet use the nano finance license to charge 33% interest to all customers without verifying the actual purpose of the loan. For credit cards, which have an interest ceiling of 16%, there is an idea to encourage customers who keep making minimum payments to switch to longer-term loans with interest reduced to about 8-10% and repayment spread over five to seven years. As for vehicle title loans, which use the registration book as collateral and have a very low non-performing loan rate, the interest rate should be reviewed to align with the true risk of the collateral. Mr. Parithat Patcharachai, Executive Chairman of Muangthai Capital Public Company Limited, or MTC, said he agrees in principle with the Bank of Thailand stepping in to regulate the non-bank business, as it will help raise standards and give the public a direct channel to file complaints. He noted that part of the growth of non-banks reflects a shift away from informal lending, which stood at about 500 billion baht a decade ago according to a report by the International Monetary Fund, or IMF. MTC has set a target for loan growth of 10-15% in 2026, but growth in the first half was only 8-10% amid a challenging economy, so it plans to revise its target. Meanwhile, non-performing loans in the second quarter rose slightly from 2.57%, prompting the company to exercise more caution and tighten its lending criteria for customers carrying high debt burdens in the hundreds of thousands of baht.
Muangthai Capital Public Company LimitedMTC's executive chairman agrees in principle with the Bank of Thailand's tighter oversight of non-bank licensing and interest-rate caps, a regulatory development whose net effect on MTC is unclear.
