The Bank of Thailand will allow state banks to enter into joint ventures with the private sector to establish asset management companies to manage debt and non-performing loans, it said on Wednesday.
The ventures must be established before December 2024 and the lifetime of the business cannot exceed 15 years, the central bank said, adding that the companies could receive transfers of debt of no more than 20 million baht per case.
The announcement follows plans outlined by Prime Minister Srettha Thavisin earlier this month to tackle soaring household debt.
Thailand has one of the region’s highest ratios of household debt, at 16.2 trillion baht or 90.9% of gross domestic product (GDP), as of the end of September 2023.
The use of illegal loan sharks is rife among lower-income families unable to get bank loans, with many people trapped by debt with high interest rates.
A recent survey showed Thailand ranks top in terms of “fragile” borrowers compared with other countries.
Credit rating agency data showed that Thai borrowers who enter the central bank’s debt assistance programme account for 11% of total borrowers, compared with a range of around 1-5% in Indonesia, Malaysia, India and China.
The figures show that the fragility of Thai borrowers, which was severely exacerbated by the pandemic, is higher than in many other countries.
The central bank noted that while banks’ overall non-performing loans fell slightly in the fourth quarter of last year, the NPL ratio of consumer loans increased to 2.88% from 2.79%. Mortgage NPLs rose to 3.33% from 3.24%.