GSB told to ease up on informal debtors

GSB told to ease up on informal debtors

Bad debt transfer talks continue

People visit a Government Savings Bank booth for financial advice at a fair.  Pornprom Satrabhaya
People visit a Government Savings Bank booth for financial advice at a fair.  Pornprom Satrabhaya

The Finance Ministry has ordered the Government Savings Bank (GSB) to consider relaxing conditions for informal debtors, says Deputy Finance Minister Krisada Chinavicharana.

He said the government is firmly committed to solving economic problems, particularly those related to formal and informal debt.

Regarding informal debt, the Interior Ministry was assigned to register informal debtors and facilitate negotiations with informal lenders.

Thus far, 400 informal debtors have been sent to the GSB for debt restructuring.

Mr Krisada said some informal debts become non-performing loans (NPLs) in the formal financial sector, while others are blacklisted by the National Credit Bureau, preventing loan access from financial institutions.

According to the Bank of Thailand's regulations, financial institutions are banned from granting additional loans to informal debtors with NPLs.

The GSB said it plans to hold further discussions with the central bank on whether it is permissible to grant additional loans in such cases, whether debt restructuring is required for informal debtors to receive additional loans, or whether this regulation can be waived for specialised financial institutions (SFIs).

As of Dec 1, 2023, a total of 140,000 people who claim 9.8 billion baht in informal debt have registered for the government's debt relief programme. Eligible debtors for the mediation scheme totalled 21,000, with 57%, or 12,000, successful cases.

The government reported it reduced the informal debt total by 670 million baht in two months via the scheme.

As for progress on establishing joint venture asset management companies (JV-AMCs) to transfer the bad debts of SFIs for debt restructuring, the GSB is in talks with potential business partners to set up a JV-AMC. The bank is awaiting approval from the Bank of Thailand.

The Finance Ministry approved the establishment of JV-AMCs in the first quarter of this year.

The ministry expects the measures to address SFIs' limitations in managing NPLs.

Current regulations prevent SFIs from agreeing to debt haircuts, leading to an accumulation of retail NPLs.

JV-AMCs are expected to be non-profit operators, so the price of debt transferred from state financial institutions will be based on collateral.

Without collateral, the discount is applicable to AMCs' operating expenses.

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