The Fiscal Policy Office (FPO) is calling on state financial institutions and commercial banks to implement debt restructuring measures to reduce the debt repayment burden rather than extending the repayment period, says director-general Pornchai Thiraveja.
Regarding sustainable debt assistance measures by commercial banks and specialised financial institutions, the FPO is encouraging them to improve debt restructuring by reducing debtors' repayment burden rather than solely extending the repayment period in order to reflect debt repayment capability and debtors' obligations throughout the contract.
The central bank plans to extend its debt assistance measures until the end of 2023.
In addition, the Finance Ministry stipulated the implementation of debt restructuring measures will be a performance indicator for state financial institutions.
Apart from providing financial literacy about borrowing, finance and debt management, the ministry is also holding a debt mediation event for financial institutions to jointly help restructure debt for people who have repayment problems.
Some 413,000 participants have entered debt restructuring programmes.
The Bank of Thailand, the FPO, and various agencies have drafted a royal decree to regulate auto hire-purchase and the leasing of cars and motorcycles to ensure consumer protection and deal with elevated household debt.
Hire-purchase interest will be charged at an effective interest rate ceiling of 10% annually for a new car, 15% annually for a used car, and 23% annually for a motorcycle.
The Bank of Thailand set a goal to reduce Thai household debt to below 80% of GDP to reduce economic and financial risks.
The central bank said it aims to reduce household debt to sustainable levels by issuing guidelines on the subject, including motivating creditors to adopt risk-based pricing by charging interest rates based on borrowers' credit risk. Another tactic is pushing relevant laws to allow debtors with no means to repay their debts to voluntarily enter the debt rehabilitation and/or bankruptcy process.
The regulator also wants to introduce new responsible lending that discourages excessive ads to prevent extreme indebtedness, setting fair contractual terms and conditions.
Household debt in the fourth quarter of last year stood at 15.1 trillion baht, accounting for 86.9% of GDP.
Mr Pornchai said household debt stemmed largely from the purchase of durable goods, such as houses and vehicles in order to create income in the future, making up 35.1% and 12% of the total, respectively. Work-related personal loans account for 17.9% of household debt.
Debt from the purchase of durable goods and work-related personal loans combined make up 65% of the total household debt.
Secured loans or loans backed by an asset such as a car or a house account for 47.1% of the total, or almost half of household debts, which indicates households are taking on debt to buy property, not for consumption, he said.
Non-performing loans related to household debt remained stable at 2.62% in the fourth quarter of last year, according to a report by the planning office.
Special mention loans for automobiles, which are overdue for more than 30 days but less than 90 days, represent the highest proportion of total outstanding loans at 13.7%.