Central bank sets floor for pandemic debt support
The Bank of Thailand has set guidelines for minimum assistance that financial institutions must offer to debtors to ease their financial burden amid the pandemic, effective from April 1.
Veerathai Santiprabhob, the central bank's governor, said the coronavirus outbreak has affected individuals and small and medium-sized enterprises (SMEs) on a far-reaching scale, leading to the need for a guideline.
"A policy rate cut is insufficient to help borrowers," he said.
All lenders, comprising commercial banks, specialised financial institutions (SFIs) and non-bank and leasing companies, are required to comply with the guidelines covering six types of loan product: credit cards; personal and car title loans; auto and motorcycle loans; machinery leasing; mortgages; and SME, nanofinance and microfinance loans.
The minimum amount due on credit cards and revolving loans under the guideline will be cut to 5% until 2021 from 10%, rising to 8% in 2022. The rate returns to a 10% minimum due in 2023.
Borrowers are also allowed to refinance their unsecured loans into longer-term loans with lower interest rates.
Credit card rates are capped at 20% annual interest.
Mr Veerathai said the minimum debt restructuring measures would help creditors control bad debt stemming from customers affected by the outbreak and unable to make debt payments.
"Borrowers who are still employed and can make their loan payments should continue servicing debt as usual, while financial institutions should offer them attractive measures to maintain loan quality," he said.
Individual financial institutions are offering their own debt restructuring plans to help customers amid the hardship.
The Bank of Thailand issued debt restructuring measures in late February.
In the two weeks after the measure was implemented, 30,000 borrowers with combined loans of 234 billion baht applied for the scheme.
Applicants have increased to 156,000 with total debt of 310 billion baht, Mr Veerathai said.