Costly fuel affecting hire-purchase debtors

Over the past few months, prices for pickups, particularly in the resale market, have tumbled 15 to 20 per cent following a surge in diesel prices to nearly Bt50 a litre. Newcar sales have also fall¬en.

There are concerns  banks with high exposure to the hirepur¬chase business may face a larger number of nonperforming loans (NPLs) as customers find them¬selves unable to cope with the higher cost of living.

Sakchai Peechapat, executive vice president for retail banking at Tisco Bank, admitted his bank had been seeing delayed payment of monthly instalments on auto loans recently.

Last month, Tisco Bank had NPLs in its hirepurchase busi¬ness representing 1.5 to 1.6 per cent of total loans, down from 1.61.7 per cent at the end of last year.

Sakchai said the NPLs were classified in two categories: those with payments delayed for more than 60 days grew 10 per cent year on year last month, and those with payments delayed for more than 30 days grew 20 per cent.

Once the bank underwrites loans, it must be more flexible in monitoring them, he said.

"We have a debtrestructuring programme under which we may extend the loan period to reduce the amount of monthly instal¬ments."

Sakchai said carmakers and dealers should give accurate information to their customers - that diesel is the most suitable fuel for commercial vehicles in the long term.

He said in the second half of the year, Tisco Bank would increase down payments for auto loans from 10 to 15 per cent of a car's price  to increase loan qual¬ity.

Newauto loans are presently down about 20 per cent, espe¬cially upcountry, Sakchai said, adding that pickup sales were about 50 per cent below "normal". Usedcar sales have been hardest hit by oilprice hikes, because buyers are reluctant to purchase pickups with diesel engines.

Thanachart Bank senior exec¬utive vice president Bundit Cheevadhanarak said the main factors affecting the hirepur¬chase business were rising oil prices and living costs.

Thanachart Bank is offering debtrescheduling programmes in which the period of repayment is extended from 48 months to 84, to  help debtors survive.

About 200 debtors entered the programme last month and another 300 so far this month. Normally, the monthly figure is about 100, he said.

Thanachart Bank's hirepur¬chase business accounts for 79 per cent of Thailand's Bt250 billion worth of outstanding hirepur¬chase loans.

Kiatnakin Bank president Tawatchai Sudtikitpisan said his bank's hirepurchase business involved mainly pickups.

"We're offering a debtrescheduling programme to extend the period of payment from 48 months to 84," he said, referring to customers suffering from the higher cost of living.

Despite present economic conditions, the banks are main¬taining their targets for growth in auto loans this year.

Sakchai of Tisco Bank believes car sales will grow even more slowly in the second half "The achievement of our target for autoloan growth will depend on economic sentiment the rest of the year," he said.