The Bank of Thailand has eased the conditions of the Debt Clinic's unsecured loan restructuring programme to let more borrowers apply for debt solutions, with additional restructuring options.
The new conditions became effective on Sept 8.
According to the central bank's announcement, it is allowing borrowers who were classified as non-performing loan (NPL) clients of financial institutions before April 1 this year to apply for the debt restructuring scheme. This adjustment will let new NPL borrowers join the programme in line with the ongoing Covid-19 pandemic.
Previously only those with credit card and personal loan NPLs before Oct 1, 2021, were allowed to enter the programme.
In addition, the central bank has changed a previous debt repayment condition to a maximum debt repayment period of more than seven years but not exceeding 10 years, with an interest rate of 5%. This is a change from a maximum debt repayment period of seven years with a 5% interest rate.
The Bank of Thailand has also introduced two additional debt restructuring options for applicants, up from the previous single option.
For the additional options, applicants to the Debt Clinic can now choose between: repaying debt over a maximum period of four years with interest charged at 3% per annum; and a maximum debt repayment period of more than four years but not exceeding seven years, with a rate of 4%.
Thanyanit Niyomkarn, assistant governor at the Bank of Thailand, said that the uneven economic recovery following the pandemic, rising costs of living and higher interest rates have had different impacts on borrowers, so each borrower's ability to repay debt was different.
Some of them can only repay a low amount of debt each month, so they need a longer timeframe, while others can afford higher monthly amounts. As a result, the Debt Clinic's committee decided to adjust the conditions to better reflect different repayment abilities and Thailand's economic circumstances.
"A borrower should consider selecting a debt restructuring option in line with their debt repayment abilities. The options will give them greater opportunities to clear debt and close accounts faster with no penalties or fee charges," Mrs Thanyanit said.
As of August 2022, the number of borrowers restructuring debt under the Debt Clinic programme was 30,137, with 90,539 loan accounts. Their total debt principle was around 6.85 billion baht. On average, each borrower in the programme has two creditors, with outstanding loans of 232,844 baht each, according to Bank of Thailand data.
The Debt Clinic is part of the central bank's debt restructuring measures, aimed at tackling the country's swollen household debt, and is under the management of Sukhumvit Asset Management.
In the first quarter of 2022, Thailand's total household debt stood at 14.6 trillion baht, rising 80 billion baht from the previous quarter. However, the country's household debt to GDP ratio declined to 89.2% in the first quarter of this year, from 90% in the previous quarter, thanks to greater GDP growth.
The central bank, in collaboration with the Finance Ministry and other organisations in the public and private sectors, will hold an online debt mediation event from Sept 26 to Nov 30, with around 60 financial institutions expected to participate.