Debt Clinic ready to cure thousands

Debt Clinic ready to cure thousands

BoT scheme pools unsecured bad loans

The Bank of Thailand expects tens of thousands of debtors who have defaulted to join its Debt Clinic, a scheme that pools unsecured bad loans owed to multiple creditors, covering 19 non-bank companies.

Some 490,000 unsecured debtors owed at least two financial institutions a combined debt of 49 billion baht, qualifying for the Debt Clinic scheme, said central bank governor Veerathai Santiprabhob. The scheme should help cut the country's household debt and sustain economic growth in the long term, he said.

On Tuesday, the central bank signed a memorandum of understanding with Sukhumvit Asset Management (SAM) and 19 non-bank financial institutions for the second phase of the Debt Clinic.

Sixteen banks participated in the first phase.

The participating non-bank firms include Krungthai Card, Krungsri Credit Card, Tesco Card Services, Ayudhya Capital Services, General Card Services, Muangthai Capital, Citicorp Leasing Thailand, Easy Buy, Aeon Thana Sinsap Thailand and Promise Thailand.

The Bank of Thailand also eased requirements to allow borrowers whose debts turned sour before Jan 1 this year to apply for the Debt Clinic scheme, while non-bank bad debtors can apply from May 15 onwards.

With 35 financial institutions joining the scheme, bad debtors will be helped on a wider scale as these firms represent 99% of total unsecured loans, Mr Veerathai said.

Since the launch of the first phase of Debt Clinic scheme on June 1, 2017, 37,000 debtors with non-performing loans (NPLs) received financial advice from the clinic, of which 1,500 borrowers completed their debt refinancing process and 16 completed debt payment and exited the scheme.

"Some 1,500 debtors completing debt refinancing seems to be a low number because most debtors who default owe to non-bank companies," he said.

Mr Veerathai said the clinic's low interest rate, in a range of 4-7% per year, far below the 20% charged by some institutions, would attract bad debtors to join the programme.

The longest debt payment instalment period at the clinic is 10 years, which should help alleviate debtors' financial burden, he said.

For instance, a debtor with a loan principal of 100,000 baht is subject to a monthly repayment of 1,200 baht.

The clinic is part of the Bank of Thailand's effort to reduce household debt by pooling NPLs that are owed to multiple creditors under SAM management.

The goal is to better address them by collecting comprehensive information about the troubled debtors.

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