FPO says household debt level not yet worrisome

FPO says household debt level not yet worrisome

A public phone booth is covered with leaflets advertising high-interest loans from non-bank operators. (File photo)
A public phone booth is covered with leaflets advertising high-interest loans from non-bank operators. (File photo)

The Fiscal Policy Office (FPO) has rushed to soothe jitters, saying Thailand's household debt, which reached the highest level since the first quarter of 2017, is not worrisome yet as most of the leverage is backed by collateral.

Of the total family debt load, 42.8% was borrowed from commercial banks, 28.4% from specialised financial institutions and the remainder from non-bank institutions, said Lavaron Sangsnit, director-general of the FPO.

Half of the debt owed to commercial banks and specialised financial institutions was mortgages and auto loans that are asset-backed debt, while another 16.4% was loans for business operation, he said.

However, the Finance Ministry's think tank will closely monitor the issue and teach people about financial literacy, said Mr Lavaron.

The National Economic and Social Development Council recently flagged concerns over household debt, which rose by 6.3% year-on-year in the first quarter to 13 trillion baht, making up 78.7% of total GDP, the highest level in nine quarters.

In a related development, Predee Daochai, chairman of the Thai Bankers' Association, said commercial banks are still sticking to capping the debt-to-service ratio (DSR) at 40%, though the Bank of Thailand has held off on implementing a standardised DSR calculation until next year.

The banking industry has maintained prudent practices on retail loan scrutiny, he said.

Typically, the DSR of a borrower should not exceed 40% of total monthly income.

Banks have long used a DSR of 40% to keep good asset quality, said Mr Predee.

"It will take more time to make consumers understand their debt obligation should not exceed payment ability to prevent debts from turning sour and to reduce the country's household debt," he said.

Mr Lavaron said the Finance Ministry will seek approval from the cabinet next week to extend spending for the 1,000-baht tourism cash handout and the 15% rebate, with a cap of 4,500 baht, for spending on spa, car rental and tour guide services.

The Comptroller-General's Department has also adjusted the ways to approach merchants to participate in the schemes, which are part of the 316-billion-baht stimulus, by sending officials to meet them instead of waiting for their registrations.

Some 3,300 merchants have already signed up for the schemes, he said.

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