Council raises issue of NPL surge at SFIs

Council raises issue of NPL surge at SFIs

Relief packages seen skewing real figures

Visitors peruse housing loans at the GH Bank booth at Money Expo 2019. (Photo by Patipat Janthong)
Visitors peruse housing loans at the GH Bank booth at Money Expo 2019. (Photo by Patipat Janthong)

Chatchai Sirilai, chairman of the Government Financial Institutions Council, has flagged concerns about spikes in bad loans among specialised financial institutions (SFIs) after their debt relief measures expire, urging state lenders to start assessing their borrowers' repayment ability.

The current non-performing loan (NPL) figures do not reflect the actual picture, he said, as banks have offered debt relief packages to help their customers and this prevents bad loans from jumping considerably.

The big question is how banks will know whether their customers will be able to resume servicing debt, so each SFI should gather information about total loans participating in the debt holiday scheme and assess these debtors' repayment ability and how many NPLs the banks' balance sheets can tolerate, Mr Chatchai said.

"Personally, NPLs are quite certain to significantly climb higher, and no bank won't see higher NPLs, so they must begin assessing the debt-servicing ability of their customers who join the debt relief scheme to seek ways to brace for rising NPLs," he said.

SFIs include Government Savings Bank, GH Bank, Export-Import Bank of Thailand, Small and Medium Enterprise Development Bank of Thailand and Islamic Bank of Thailand.

Mr Chatchai, who is also president of GH Bank, said his bank has geared up for setting aside additional provisions for credit losses, though its NPL coverage ratio stands at 140% now.

GH Bank's debtors with total loans worth 200 billion baht have participated in the debt holiday scheme. The bank will survey their debt-servicing ability 60 days ahead of the debt relief scheme's expiry in September, Mr Chatchai said.

The bank's capital adequacy ratio (CAR) of 15% seems sufficient for additional government measures to help those ravaged by the pandemic, as it is far above the central bank's minimum requirement at 8.5%.

With the capital buffer, GH Bank could withstand 20% of the 200 billion baht in debt (40 billion baht) turning sour, Mr Chatchai said. The bank's CAR falling somewhat is not an issue, though its internal threshold has a minimum requirement of 10.5%.

According to data from the Fiscal Policy Office, the NPL ratio of the six state-owned banks rose to 3.88% at the end of March from 3.67% at the end of 2019 and 3.61% at the end of 2018.

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