BoT eases Debt Clinic conditions for bad loans

BoT eases Debt Clinic conditions for bad loans

The Bank of Thailand has relaxed conditions for the Debt Clinic project to aid borrowers saddled with non-performing loans (NPLs) in response to expectations that retail distressed debt will continue increasing throughout the pandemic.

The central bank has adjusted two conditions of the Debt Clinic, its debt restructuring scheme for unsecured loans.

The bank extended the cut-off date from Jan 1 to July 1 to let unsecured bad-debt customers apply for the programme to restructure their NPLs, while offering new loans to borrowers who can pay off a minimum of 50% of overdue loans.

Thanyanit Niyomkarn, assistant governor of supervision group 2 at the central bank, said the extension of the NPL cut-off date will open more opportunities for borrowers who were classified as NPLs in the first half of the year and struggled during the coronavirus outbreak.

In addition, the central bank allows participants of the Debt Clinic programme to borrow anew if they can pay 50% or more of their total outstanding debt.

The Bank of Thailand did not permit Debt Clinic participants to take on more loans. Additional credit lines, however, were offered depending on consideration by each financial institution.

The easing of conditions is intended to attract more debtors to restructure bad debt under the programme. It also aims to get NPL customers to exit the programme faster, as the average time in the programme is expected to be less than five years.

The central bank set a maximum period of 10 years for debt restructuring in the Debt Clinic.

"The impact of the pandemic will cause NPLs to rise among personal finance customers in both credit cards and personal loans," Mrs Thanyanit said. "Meanwhile, credit card loans represent the largest customer number out of retail loans."

Niyot Masavisut, president of state-owned Sukhumvit Asset Management, said some 3,000 NPL customers have entered the Debt Clinic programme since the start of the year, a significant increase from 2,000 customers for the entirety of 2019.

Meanwhile, 30,000 consumer loan borrowers have applied for the debt restructuring project so far in 2020, compared with 28,000 in the whole of 2019.

"The outbreak is a key negative factor weakening the debt payment ability of borrowers and raising the number of NPLs, and there are still a lot of customers waiting to join the programme," Mr Niyot said.

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