Thai borrowers top global rankings for greatest fragility

Thai borrowers top global rankings for greatest fragility

Government officials kick off the ‘debt settlement market’ event in Nonthaburi last month. (Photo: Varuth Hirunyatheb)
Government officials kick off the ‘debt settlement market’ event in Nonthaburi last month. (Photo: Varuth Hirunyatheb)

Thailand ranks top in terms of fragile borrowers compared with other countries, and is seeking debt assistance measures from the Bank of Thailand.

According to the data of a credit rating agency, Thai borrowers who enter the central bank’s debt assistance measures account for 11% of total borrowers, the largest level compared with a range of around 1-5% in Indonesia, Malaysia, India and China. Meanwhile, the proportion in Australia and New Zealand is 1%, said Suwannee Jatsadasak, the Bank of Thailand’s assistant governor for the supervision group.

The data reflects that the fragility of Thai borrowers, which was severely impacted by the pandemic, is higher than many other countries.

Meanwhile, Thailand’s household debt-to-GDP ratio has been high for a long time, and the country’s economic recovery following the pandemic has been slower than its regional peers.

“Thailand's household debt-to-GDP tallied 90.9% in the third quarter of 2023, and the ratio is expected to increase to 91% in the fourth quarter due to higher growth of consumer loans than Thai economic growth,” Ms Suwannee said.

In addition, the Bank of Thailand on Monday reported non-performing loans (NPLs) of the overall banking industry in the fourth quarter of 2023 at 2.66%, a slight decrease from 2.7% in the previous quarter.

However, the NPL ratio of consumer loans increased to 2.88% in the fourth quarter last year, from 2.79% in the previous quarter.

Consumer loan NPLs are rising, including all types of loan products, particularly mortgage NPLs which rose to 3.33% in the fourth quarter of 2023, up from 3.24% in the previous quarter.

Auto loan NPLs rose to 2.13% from 2.10%, while credit card NPLs increased to 3.57% from 3.34%. The NPL ratio of personal loans increased to 2.13% from 2.1%, according to the central bank’s data.

Ms Suwannee said rising NPLs of housing loans was largely due to low-income borrowers earning less than 30,000 baht per month and purchasing a house with a unit price below 3 million baht.

Moreover, the recent interest rate hikes also impacted the debt repayment ability of borrowers amid sluggish economic growth.

Some 90% of housing loans are charged with a minimum retail rate (MRR). However, the MRR has increased by a lower number of percentage points compared with the minimum lending rate and minimum overdraft rate recently to ease the financial burden of individual borrowers.

The central bank expects NPLs of housing loans to continue to increase in the first quarter of this year. However, higher bad debt of the loan product would be attributed to borrowers of specialised financial institutions, and the state-owned banks have implemented measures to assist the vulnerable borrowers, Ms Suwannee said.

In addition, she said the Bank of Thailand would hold discussions with the National Economic and Social Development Council after the state planning agency asked the central bank to reduce the minimum payment rate of credit card debt to 5%, from the current level of 8%.

Nevertheless, the Bank of Thailand is investigating the fraudulent case of a bank loan officer selling personal data of over 5,000 customers. If the regulator found that the case was due to the bank’s weak internal controls, the central bank would order the Crime Suppression Division to take action as the next step. However, the thief was arrested and sacked.

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