The Bank of Thailand has announced a series of measures to start its long-term battle against almost 16 trillion baht of household debt, which has become an impediment to the country’s economic growth.
Some measures will take effect from next year, while other more complicated steps — such as risk-based pricing and using debt-service ratio to assess borrowers — will likely become effective much later, deputy governor Ronadol Numnonda said on Friday.
“The most important thing is adjusting the behaviour of both lenders and borrowers to ensure we have good quality of debts and to bring down the debt level over the long term,” Mr Ronadol said.
“We can’t use strong measures to quickly drag the debt level down as it will have a negative impact” on the economy, he added.
The central bank aims to gradually bring down household debt to 80% of gross domestic product from about 90.6% — the highest among major Asian economies. It is accelerating efforts to rein in debt as interest rates rise to eight-year high, raising default risks for economically sensitive groups amid an uneven economic recovery.
About a third of the people in Southeast Asia’s second-largest economy owe a total of 15.96 trillion baht to formal lenders and an estimated 1 trillion baht borrowed from loan sharks.
Among other details of the central bank’s plan:
- Responsible lending guidelines, which will help upgrade lending practices from advertising products to selling debts, will be effective from January 2024.
- Measures to help lower persistent debt will be implemented from April next year.
- Lenders who want to use a risk-based pricing system on their customers can apply with the central bank and start testing the process next year.
- Using a debt-service ratio to assess borrowers may be implemented in 2025, depending on the economic situation.