LOAN DEMAND EXPECTED TO RISE

       More borrowers are likely to seek housing and other conฌsumer loans this quarter due to the positive outlook for the property market, according to a Bank of Thailand survey.
       Demand for corporate loans will possibly also rise, particularly from small and mediumsized enterprises, said the survey on financial institutions' lending.
       The institutions will, however, continue to tighten lending standards as a result of concerns over asset quality. The debtrepayment ability of both the business and household sectors remains fragile until any economic recovery is sustainable.
       "Financial institutions anticipate that the demand for housing loans and other consumer loans will slightly increase. This is a result of an expected improvement in the property sector in the second quarter of the year while lending interest rates have been low," said the central bank's report.
       Demand for creditcard loans, however, is expected to decline in the current quarter because of the worsening creditworthiness of debtors.
       The financial institutions will increasingly tighten their credit standards for all types of the consumer loans, due to the concerns over asset quality - particularly for housing loans.
       "It indicates the financial institutions are more cautious about running businesses while the global and domestic economies have been fragile," the central bank said.
       Deputy Governor Bandid Nijathaworn said earlier that the banking system's loans had dropped Bt220 billion over the first six months of the year or 3.4 per cent from the end of last year, due to lower demand and tighter credit approvals.
       In the second quarter, the demand for housing and other consumer loans slightly increased from the previous quarter, thanks to attractive lending rates.
       The government's measures to boost the property sector, particularly townhouses, also helped bolster the demand for mortgages.
       Demand for other consumer loans rose in the second quarter after demand for essential goods picked up. But consumers continued to be cautious about their spending, indicating fragile confidence.
       Demand for creditcard loans, however, dropped from the first quarter because consumers were not confident about income security and their job status.
       The survey, financial institutions tightened their housingloan standards more than had been expected in the second quarter, despite higher demand. They were concerned about economic recovery and people's debtrepayment ability.
       They continued to tighten the criteria for creditcard loans because cardholders' ability to repay debt declined.
       An increasing number of debtors were unable pay their debt in time, while those who could not repay within 90 days and had their cards cancelled also rose.
       The survey found that demand for corporate loans from large companies declined in the second quarter, in line with demand for inventory production.
       Demand for loans for fixed investment and working capital was stable from the first quarter, indicating the economy had already bottomed out.