Financial institutions are ready to comply with the Bank of Thailand's household debt resolution, starting with measures to help reduce persistent debt (PD) from April next year.
Chatchai Sirilai, managing director of the Bank for Agriculture and Agricultural Cooperatives (BAAC), said the bank has roughly 4.3 million customers, accounting for 10 million loan contracts, with agriculturalists representing the majority.
"In addition, BAAC's client base is largely made up of PD borrowers, who fall into the aged and vulnerable segment. The bank is ready to help these clients exit from the debt cycle faster in accordance with the central bank's requirements," Mr Chatchai said at a joint press conference yesterday with the central bank, the Government Financial Institutions Association (GFA) and the Personal Loan Club.
As part of the household debt resolution plan, the Bank of Thailand will begin with PD for revolving personal loans and will encourage performing loan borrowers to participate in the scheme. The participants would be able to receive an interest rate not exceeding 15% per year, compared with the current ceiling rate of personal loan products at 25%.
The central bank classifies PD borrowers into two groups: general and severe PD. General PD borrowers are those indebted consecutively for three years, while severe PD borrowers are indebted consecutively for five years with a minimum monthly income of 20,000 baht if using a bank or 10,000 baht if using a non-bank.
The regulator is set to enforce the PD measures from April 1, 2024.
On the other hand, Athip Sinpagekan, vice-president of the Personal Loan Club, said the club has 34 members, which are largely non-banks. As a result, the PD of these businesses are quite high, in terms of customer numbers and the loan amount. Non-banks who are members of the club are ready to comply with the central bank's measures. In addition, a business operator would also encourage its clients to participate in the PD programme.
Payong Srivanich, chairman of the Thai Bankers' Association, said commercial banks are preparing to comply with the central bank's PD measures. However, the PD of the commercial banking industry represents only 36% of GDP, while the country's household debt amounts to 16 trillion baht, or 90.6% of GDP.
"Banks will encourage performing loan clients to join the PD programme, even though the PD problem currently has no significant effect on the commercial banking sector," he said.
Vitai Ratanakorn, chairman of the GFA, who is also president of the Government Saving Bank (GSB), said the central bank's comprehensive measures on household debt management would support specialised financial institutions in solving the problem completely. However, the GSB doesn't have any PD, according to the central bank's definition.
Ronadol Numnonda, deputy governor of the Bank of Thailand, said the central bank would approach auto hire-purchase loan operators and the remaining co-operatives to participate in the central bank's household debt resolution.
Around 70% of total household debt is currently under the central bank's supervision.