Debt Clinic sees surge in applicants

Debt Clinic sees surge in applicants

The number of applicants for the Debt Clinic's unsecured loan restructuring programme recently increased by 2-3 times to around 200,000 because of the impact of the Omicron variant.

The clinic was initiated by the Bank of Thailand and is managed by Sukhumvit Asset Management Company (SAM).

There are around 80,000 unsecured loan accounts with total loans outstanding of around 6 billion baht restructuring their debt with the clinic.

The central bank has adjusted the Debt Clinic's criteria several times to provide broader opportunities to individual borrowers suffering from the prolonged pandemic.

The Bank of Thailand recently allowed credit cards and personal loans classified as non-performing loans (NPLs) before April 1, 2022 to enter the debt restructuring scheme.

Previously only credit card and personal loan NPLs before Oct 1, 2021 were allowed to enter the programme.

The relaxation happened because more borrowers were affected by the Omicron spread, said Suwathana Rusmeerojwong, SAM's first vice-president for unsecured loan management service department, who is an executive for the Debt Clinic project.

After many of the central bank's criteria were eased, a higher number of individual borrowers could enter the debt restructuring programme, she said.

Ms Suwathana said the central bank, SAM and other related parties have discussed easing additional criteria for the Debt Clinic to help more borrowers ease their debt burden.

This easing would cover several areas, aiming to help the country reduce swelling household debt, she said.

The Bank of Thailand is concerned about high household debt levels, which now stand at 90.1% of GDP.

Even though the debt ratio briefly declined from 90.6% in the first quarter last year, the ratio is quite high and affects the debt payment ability of borrowers, especially during the prolonged pandemic, Suwannee Jatsadasak, senior director, said on the central bank's Facebook Live last week.

Thailand's high household debt ratio is a result of both the country's economic slowdown and rising household debt, particular during the pandemic.

During the pre-pandemic period, the household debt ratio was steady at around 80%.

Ms Suwannee said the central bank is mainly concerned about consumer unsecured loans, representing 28% of total household debt.

South Korea also has a high household debt ratio, but the country's income per person is higher than in Thailand. A large proportion of South Korea's household debt stems from secured loans.

Thailand's secured-loan products represent 72% of total household debt and the largest portion at 35% is from mortgages, followed by business loans at 18%.

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