The Bank of Thailand has relaxed conditions for its Debt Clinic, a scheme that pools unsecured bad loans owed to multiple creditors, to cover cases that have a single debtor and expanded qualified creditors to specialised financial institutions (SFIs) to step up efforts to keep a lid on bad loans.
The third phase of the Debt Clinic allows defaulted debtors who owe at least one creditor, regardless of whether the debtor was determined by a court to participate in the scheme.
SFIs are also allowed to join the scheme, said Thanyanit Niyomkarn, assistant for the central bank's supervision group.
Borrowers whose debts turned sour before Jan 1 this year are eligible to apply for the Debt Clinic scheme, she said.
The relaxation took effect from Feb 1.
The clinic earlier allowed only unsecured loan borrowers who failed to service debt owed to at least two creditors -- commercial banks and non-bank financial institutions -- to participate in the scheme.
"The looser conditions would allow unsecured loan defaulters easier access to the scheme and the central bank expects more participants this year," she said.
At the end of last year, 3,194 defaulted debtors holding 13,000 credit and cash cards loans participated in the scheme, and the central bank aims for an additional 8,000 by the end of the year.
Participants with 72 accounts, representing 2.3% of the total, completed the debt refinancing process and the central bank targets a higher success ratio this year.
On average, participants had debt principal of 234,843 baht lent by three creditors.
The monthly debt instalment payment amounted to 3,144 baht, with a 91-month debt repayment period at the end of last year.
Mrs Thanyanit said the central bank is also working on financial literacy to educate consumers about financial discipline to control non-performing loans (NPLs) and overall household debt nationwide.
According to Bank of Thailand data, household debt was 13.2 trillion baht or 79.1% of the country's GDP at the end of September 2019. With seasonal adjustment, the debt ratio was 79.3% of GDP, rising 5.5% year-on-year.
There are 35 financial institutions joining the Debt Clinic scheme, managed by Sukhumvit Asset Management.
The Government Savings Bank (GSB) is the latest financial institution to join the scheme.
Defaulters who join Debt Clinic receive low interest rates of 4-7% per year, far below the 20% charged by some institutions, and they also enjoy a debt repayment period of 10 years.
GSB has launched a debt refinancing package for credit cardholders to ease their financial burden. Under the debt refinancing package, the bank offers interest rates of 8.5-10.5%, lower than the market rate of 18-20%.
Chokchai Kunawat, senior executive vice-president for credit and operation support at GSB, said the bank prepared a budget for a refinancing package of 10 billion baht that will be available from March to June this year.