GSB takes out auto title loans to keep interest rates low

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The GSB logo exhibited at a Money expo. The state-backed bank introduces auto title lending to put pressure on interest rates. (Photo by Patipat Janthong)

The Government Savings Bank (GSB) plans to enter the auto securities lending market with a focus on retail loans worth up to 200,000 baht per borrower.

The bank’s penetration into the auto securities lending market is aimed at lowering the interest rates charged in this lending segment, President Vitai Ratanakorn said.

The Bank of Thailand has cut interest rates on auto securities lending to 24%, from 28% on Aug. 1, but the rate remains high, Vitai said.

GSB plans to cap interest on auto title loans at 18%, plus or minus 2% at most. The 18% rate will be assessed based on customer profiles, Vitai said.

For example, a car in good condition may receive an interest rate of 16%, while older models or vehicles with risk may see a 2% interest added on top of the 18% rate.

The 18% interest rate for auto loans, classified as unsecured loans, is lower than the interest rates charged by non-bank companies.

But GSB can still turn a profit because the bank’s existing unsecured loan products have interest rates below 18%, Vitai said.

Non-bank companies involved in auto securities lending have a net interest margin of 15-20%, higher than the NIM of 2% in public banks and 3% in commercial banks, he said.

GSB is evaluating a potential joint venture partner in the automotive securities lending area.

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