The Bank of Thailand plans to implement an additional debt restructuring package using targeted measures to help borrowers during the pandemic as the second-phase debt relief scheme expires.
There have been two phases of debt relief measures. The first started in April and the second from July. The first-phase programme is due to expire on Oct 22, while the second-phase programme will expire at the end of this year.
The additional package is intended to improve the efficiency of existing measures and address borrowers' problems in a targeted manner, said Mathee Supapongse, deputy governor for monetary stability.
The package will include a debt holiday, soft loans and other related measures, said Mr Mathee.
For the central bank's 500-billion-baht soft loan scheme, related regulatory bodies will consider adjusting the programme conditions to allow borrowers to better access funding sources, he said.
An interest rate incompatible with banks' financial costs is the main reason the Bank of Thailand's soft loan programme has floundered, according to an anonymous source at a state-owned financial institution.
The central bank is also assessing the concept of asset warehouses, but the idea has yet to be finalised.
Mr Mathee said the central bank has discussed with financial institutions about borrowers' debt-servicing ability, especially small and medium-sized enterprises (SMEs) and retail customers, to evaluate the outlook following the upcoming end of the second-phase debt relief measures.
Based on the discussions, around 60% of total SMEs and individual borrowers who applied for the debt relief measures were found to be capable of returning to servicing their debts normally.
As the economy continues to see uneven economic recovery, the debt repayment ability of low-income earners, SME businesses and tourism operators is still fragile.
The central bank is encouraging financial institutions to help customer segments with debt restructuring and the central bank will offer incentives for this assistance.
The central bank also requires banks to run an updated stress test and capital planning for an outbreak scenario in the next three years, which is scheduled to be reported within this month.
Amid signs of higher non-performing loans attributed to the pandemic and deteriorating income, increased bad debts will dent the banking sector's capital adequacy ratio (CAR).
"The CAR of the overall banking sector could be lower than pre-pandemic levels. But the central bank does not assess the ratio under the existing solid buffer," said Mr Mathee.
"Despite the country's sound financial stability, it could face higher risks amid rising uncertainties."
Don Nakornthab, senior director for financial stability and corporate group, said the central bank forecasts Thailand's economic recovery will take at least two years to come about and the recovery impetus is poised to be uneven.
The sluggish economic recovery will mainly affect the tourism and export sectors.
"Thailand's economic recovery will not be in tandem with the global economic recovery if we cannot reopen the country to foreign tourists as normal, while a Thai export recovery is expected to be slower than regional peers," said Mr Don.
With limited space for both fiscal and monetary policies, a targeted policy framework is needed to balance between economic growth and financial stability, he said.
Targeted policies should be implemented directly for low-income earners, the labour market, SME businesses and the tourism sector, said Mr Don.