Auto loan providers have launched new debt restructuring packages to control non-performing loans (NPLs) after forecasting higher bad debts in the first quarter due to the impact of the pandemic.
Tisco Bank, the country's leading automotive lender, introduced a debt pay-off campaign for customers purchasing commercial vans, who largely operate in tourism-related businesses and have been battered by the pandemic.
The bank launched the campaign late last year for businesses operating tour vans, which are considered on a case-by-case basis, said president and chief operating officer Sakchai Peechapat.
The solution is a financial instrument to help customers who cannot service their debts to close their loan accounts and maintain a good credit record with the National Credit Bureau.
Instalments for borrowers average between 15,000-25,000 baht per month.
Given the prolonged tourism slowdown, most tourism service operators are unable to generate any income, which reduces their ability to repay their debt.
Around 200 customers applied for the debt pay-off campaign over the past two months, he said.
"The campaign is beyond a normal debt restructuring programme. With a targeted measure focusing on hard-hit customers, it should help them during this difficult situation," said Mr Sakchai.
In December 2020, Tisco Bank's total outstanding auto loans stood at 127 billion baht, representing 57% of its total loan portfolio.
Around 25% of all auto loan customers applied for the first-phase debt restructuring measure, and most of them managed to exit the programme following its expiry in October 2020.
Approved by the Bank of Thailand, the debt restructuring programme has been extended until June 2021 on a case-by-case basis.
Mr Sakchai expects around 10% of auto loan clients to apply for the bank's second-phase debt restructuring programme after a fresh wave of Covid-19 infections emerged late last year.
The reduction in the number of applications for debt restructuring is related to the government's moderate measures aimed at containing the latest outbreak, he said.
However, auto NPLs are expected to edge up during this quarter because of a delay following the expiry of the first phase of the debt relief programme, said Mr Sakchai.
With this debt campaign, Tisco Bank aims to control bad debt this year in the auto loan segment at no higher than its existing level of 2.5%.
The bank is paying closer attention to asset quality than loan growth, anticipating total auto loan growth of 2-3% this year, he said.
For new loan bookings, the bank is targeting a 10-15% growth rate as it forecasts domestic new car sales at around 800,000 units this year.
Other major players in the domestic auto loan segment have also rolled out relief measures to aid customers affected by the pandemic.
Krungsri Auto, a car loan unit under Bank of Ayudhya, has reduced instalments by up to 30% from the original level.
For customers living within maximum control zones, based on the government's classification, the company provides a maximum three-month grace period for both principal and interest payments for motorcycle loans, and a three-month grace period for principal payments on car loans.
Krungsri Auto is also offering debt relief options on a case-by-case basis to assist hard-hit customers.
Philip Chen Chong Tan, president of Kiatnakin Phatra Bank (KKP), said the bank continues to provide financial assistance to auto loan borrowers on a case-by-case basis, and has extended help for clients to exit its debt restructuring programme.
Under a selective strategy, KKP has set its auto loan growth target at 5% in 2021, compared with an aggressive growth target of 18% last year.