Government Savings Bank (GSB) plans to grant a debt moratorium to 630,000 debtors worth a total of 6.3 billion baht to help people and businesses unable to service their debt because of the impact of the pandemic, according to a source who requested anonymity.
During the Covid-19 pandemic between 2020 and 2021, with major lockdowns causing mass layoffs, the state-owned GSB granted loans to low-income borrowers worth a total of 20 billion baht.
Customers were able to borrow up to 10,000 baht with a monthly interest rate of 0.35% and a grace period on the principal and interest payments for the first six months.
Such debt relief measures were part of the government's steps to ease public debt, which was elevated to a national agenda item, with related agencies assigned to integrate their missions and operations to resolve the issue in a sustainable way.
The cabinet granted approval to GSB on Dec 19, 2023 to assist debtors affected by Covid by following up and requesting payment of the loans.
If any debtor faces continuing financial distress that makes it impossible to service their debts normally, GSB can use a budget allocated by the government to compensate for non-performing loans (NPLs).
Eliminating these NPLs allows these debtors to be removed from the National Credit Bureau's bad debtor list, effective from Jan 6-31, 2024.
The measure, which will be offered only once to avoid affecting financial discipline, is expected to help around 630,000 debtors, said the source.
There are 22.6 million households in Thailand, of which almost 80% or 17.8 million are low-income earners, while 51% or 9 million are indebted, according to GSB data.
In 2021, 7% of indebted households accessed loans from the informal sector, with interest rates of up to 120% per year, while 32% used formal loans from specialised financial institutions and 61% borrowed from other sources.
Between 2020 and June 2023, 3.2 million GSB customers with a low level or inadequate credit accessed credit from the formal financial sector.
The bank also provided debt restructuring to 4.6 million customers.
GSB has restructured 170 billion baht worth of debt by cutting interest rates and reducing monthly instalments.
As a result, 79% of customers who entered the debt restructuring programme have been able to return to the status of regular debtor.