TBA mulls debt restructuring

TBA mulls debt restructuring

Customers browse financial services at a Money Expo. The banking industry has been focusing on helping customers via several methods of debt restructuring.
Customers browse financial services at a Money Expo. The banking industry has been focusing on helping customers via several methods of debt restructuring.

The Thai Bankers' Association (TBA) is considering extending debt restructuring measures as the domestic economic recovery should take a couple of years.

The banking industry has been focusing on helping customers ease their burden via several methods of debt restructuring.

Under the Bank of Thailand's debt restructuring scheme, this allows debtors to suspend principal and interest payment for up to six months.

The central bank has implemented the debt restructuring programme since April 1.

"We need to monitor the economy before making any decision about the debt restructuring programme, as will the central bank," said TBA chairman Predee Daochai.

"Normally, debt restructuring is available together with loan offerings."

The Joint Standing Committee on Commerce, Industry, and Banking meeting on Wednesday, chaired by the TBA, maintained its outlook for country's GDP contraction in a range of 3-5% this year, while exports are expected to shrink between 1% and 3%.

It will take around 2-3 years for the Thai economy to return to its normal growth trajectory, said Mr Predee.

He said the TBA urges the government to support additional debt guarantees under the Thai Credit Guarantee Cooperation's portfolio guarantee scheme 9 in order to support the central bank's soft loan scheme.

The additional loan guarantee scheme will support small and medium-sized enterprises that have been reeling from the pandemic to gain easier access to the central bank's soft loans.

Banks have withdrawn around 75 billion baht of the central bank's soft loans since its implementation, with total loans amounting to 500 billion baht.

Under the conditions of the soft loan scheme, banks cannot offer credit lines to all customers.

Loan approval is mainly based on debt payment of the borrower.

The soft loan scheme is not eligible for customers that are saddled in the non-performing loan (NPL) segment.

Mr Predee said bad debts in the banking industry could rise further because the pandemic has mounted pressure on the fragile economy.

Yet the banking sector's solid capital base should allow financial institutions to handle higher NPLs, he said.

Banks hope economic activities will gradually pick up in line with the government's relaxation of lockdown measures, said Mr Predee.

Mr Predee, who is also a president of Kasikornbank, said the bank has already set general reserves for embattled flag carrier Thai International Airways Plc.

The bank is ready to collaborate on the financial recovery of the airline in accordance with the company's business rehabilitation plan.

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