Troubled debt set to exceed B1tn

Troubled debt set to exceed B1tn

Rising living costs hit repayment ability

The National Credit Bureau (NCB) estimates by year-end, debts in the troubled debt restructuring (TDR) programme could exceed 1 trillion baht as a result of the weaker repayment ability of borrowers.

According to the NCB's data, the TDR level was around 990 billion baht in the third quarter this year and the amount could exceed 1 trillion baht in the fourth quarter, in line with rising non-performing loans (NPLs).

The higher cost of living attributed to rising oil prices and interest rates are the key factors weakening debt repayment ability, said NCB chief executive Surapol Opasatien.

The Bank of Thailand has stipulated strict criteria for the TDR programme to properly design a scheme for debtors.

The central bank requires financial institutions to declare the cash flow of borrowers before allowing them to enter the TDR programme.

Participants need to reserve 30% of their disposable income per month to pay for living expenses after monthly debt repayment.

Moreover, the central bank requires financial institutions to maintain existing reserves for TDR clients after the completion of debt restructuring to prepare for the possibility of recurrence as bad debt.

The strict criteria could prevent some borrowers from participating in the TDR programme, said Mr Surapol.

"However, the TDR loan amount is expected to increase, while NPLs should be steady by year-end because of more debt restructuring in the banking sector," he said.

Total NPLs tallied 1.05 trillion baht as of September 2023, down by 4% year-on-year.

The bureau reported household debt totalled 13.6 trillion baht in the third quarter, up 3.8% year-on-year and 0.7% quarter-on-quarter, compared with 16 trillion as reported by the Bank of Thailand.

Mr Surapol said debt resolution is a flagship policy of the government.

Apart from informal debt, new NPLs as a consequence of the Covid crisis, which are categorised under a debt restructuring scheme dubbed NCB account status code 21, is another key segment to be managed under the government's debt resolution roadmap, he said.

As of September this year, outstanding code 21 NPLs tallied 390 billion baht attributed to 3.5 million borrowers, who are both retail borrowers and small and medium-sized enterprises.

The code 21 NPLs amount increased from 200 billion baht attributed to 1.9 million borrowers in January this year, according to the NCB.

As part of the code 21 NPLs, personal loans tallied 92.2 billion baht as of September this year, up by 9.1% year-on-year, while auto loans totalled 39.3 billion baht, a gain of 39.4%.

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