The total number of credit-card accounts was 10.45 million in July, a reduction of 31,039 - or 0.3 per cent - from June.

Non-bank issuers saw the biggest drop, losing 52,175 accounts, while Thai banks and foreign full branches still enjoyed an increase in their card accounts with rises of 17,553 and 3,503, respectively, from June.

However, non-bank companies remain the largest operators in the market, controlling a 50-per-cent share.

Tarisa Watanagese, the Bank of Thailand's deputy governor, said the issuers had probably cancelled cards which had turned into bad loans as the cardholders had lost their ability to repay.

"Soon after indications emerge that the repayment ability of a credit-card holder is diminishing, the issuer will cease the credit line. They will revoke the card later, when the cardholder misses payments and their debt turns sour. They write off the bad loans quite rapidly," she said.

The card issuers have also become more cautious by refusing to renew the expired cards of those with potential to become bad loans. They have become increasingly concerned that the debtors will not repay their debts on the card, said Tarisa.

Cardholders themselves might ask for a cancellation because they hold many cards, and this might be another reason for the sharp decline in the number of accounts, said the deputy governor. KrungsriAyudhya Card managing director Sukdee Chongmankhong said last week the company had cancelled more than 100 cards per month due to an increase in late payments. About 100 customers also cancelled their accounts voluntarily.

Outstanding non-bank credit-card payments in July were Bt73.6 billion, rising 1.5 per cent on the month, compared with a 15.9-per-cent hike in overall business. Total usage volume of the cards issued by non-bank issuers was Bt20.8 billion, or a 4.7-per-cent increase, compared to 6.4 per cent in the total system.

Non-bank issuers' card withdrawals declined 1.12 per cent month on month to Bt3.89 billion, compared to a 6.6-per-cent rise in cash withdrawals of all operators.

Krirk Vanikkul, assistant governor, said that the central bank would have quarterly discussions with card issuers to find out the reasons for the decline.

The revocation of the accounts of those who held many cards at the same time might be the main reason behind July's steep drop in accounts, he said.

Krirk said the non-bank issuers' profit situation could reflect a clear picture of their business. KrungsriAyudhya Card's Sukdee has said the company's net profit could drop to Bt100 million this year.

"I think the debtors must be extremely poor, so the creditors cancelled the cards," the assistant governor added.

He referred to recent talks with  issuers, who said their second-quarter earnings remained in good shape despite a 0.02-percentage-point increase in non-performing loans (NPLs), which reflects a deterioration of debt-servicing ability.

The operators have high reserve requirements to serve their rising NPLs and can then rapidly write off the bad loans.

Tarisa said the industry's NPLs were about 2-3 per cent of total lending.

Earlier, non-bank companies were accused of having a lax scrutiny process, particularly for low-income customers. As a result, the central bank forced them to apply the same regulations as banks.

From April next year, existing cardholders are required to pay at least 10 per cent of outstanding loans, up from the current requirement of 5 per cent. Those who hold credit cards issued from April last year are already subject to the requirement.

Anoma Srisukkasem

The Nation