New relief package to sustain debtors

New relief package to sustain debtors

Credit card spending is estimated to shrink by 10% this year. (Photo by Varuth Hirunyatheb)
Credit card spending is estimated to shrink by 10% this year. (Photo by Varuth Hirunyatheb)

The Bank of Thailand is to unveil a relief package today to help debtors ravaged by the coronavirus pandemic, as the three-month blanket debt holiday is expiring at the end of this month.

"The regulator considers the ceiling rate reduction for credit cards as reasonable because funding costs for business operators have fallen after the recent policy rate cuts," said Thakorn Piyapan, head of Krungsri Consumer, an unsecured lending unit of Bank of Ayudhya.

Lowering the ceiling rate for credit cards will take a bite out of the interest income of card issuers, he said.

Operators have prepared business adjustment plans to maintain profitability, said Mr Thakorn, who is also chairman of the credit card club under the Thai Bankers' Association.

Credit card spending this year is expected to shrink by 10%, while new consumer loans will contract by 15-20%, he said.

Total credit cards number 23 million, while there are 22 million personal loan accounts, Mr Thakorn said.

Deputy government spokeswoman Rachada Dhnadirek posted on her Facebook page that the central bank was poised to launch a new phase of debt relief measures, mostly involving rate reductions to alleviate debtor burdens during the pandemic, effective from July 1 to the end of this year.

The measures include cutting interest rates for credit and cash cards, personal loans and auto title and hire purchase loans, Ms Rachada said.

Under the new scheme, the central bank requires credit card operators to trim rates by two percentage points to 16% from 18%. Credit card debtors will be subjected to a mere 12% rate if they convert their debt into a term loan.

The cash card rate will be lowered to 26% from 28%, while the interest rate for personal loans will be slashed to 25% at commercial banks and 22% at specialised financial institutions and non-bank companies.

The central bank caps the personal loan rate at 28%.

The interest rate for auto title loans will be cut to 24% from 28%, and the rate for hire purchase loans will be trimmed by one percentage point.

For mortgages, the central bank will require lenders to provide a three-month debt holiday and debt restructuring to reduce monthly instalment payments and reschedule payment plans.

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