Weak response to central bank's debt scheme
text size

Weak response to central bank's debt scheme

Regulator to consider programme rejig

People consider loan offers by SME Development Bank at the recent Money Expo 2024. (Photo: Varuth Hirunyatheb)
People consider loan offers by SME Development Bank at the recent Money Expo 2024. (Photo: Varuth Hirunyatheb)

The Bank of Thailand plans to ramp up its debt solution programme for instalment loans after no new participants joined its recent initiative.

Suwannee Jatsadasak, the assistant governor for the supervision group at the central bank, said financial institutions have updated the regulator on the progress of the persistent debt (PD) scheme since its launch on April 1 this year.

No new borrowers joined the project, leading to central bank discussions on strategies to promote the programme with financial institutions, she said.

The central bank did not disclose the number of existing PD borrowers participating in the debt restructuring programme.

As of February this year, there were 1.33 million general PD accounts under the central bank's definition, totalling 60.9 billion baht, and 480,000 severe PD accounts, amounting to 14.4 billion baht, according to central bank data.

The regulator defines general PD borrowers as those who have been in debt for three consecutive years, while severe PD borrowers have been in debt for five consecutive years, with minimum monthly incomes of 20,000 baht at banks and 10,000 baht at non-banks.

Both general PD and severe PD are categorised as instalment loans, and classified as performing loans.

The scheme is open to long-term borrowers who fall under the PD definition and are paying more in interest than principal.

Participants in the PD programme benefit from a lower interest rate of 15% per year, compared with the maximum interest rate of 25% under personal loan regulations.

"The central bank will monitor the PD solution through the first half of this year. If the number of participants does not significantly increase, we will discuss the reasons with borrowers and then collaborate with banks to find additional solutions," Ms Suwannee said.

She said the central bank requires financial institutions to offer the PD programme to borrowers, but participation is voluntary. The programme aims to help PD borrowers exit the debt cycle, partially addressing the country's household debt problem.

In addition, Ms Suwannee said the central bank implemented a responsible lending (RL) approach this year to address the country's household debt problem. These measures encompass existing debt management and restructuring, the expansion of new loans, and asset quality control.

In the first quarter this year, there were 3.71 million loan accounts undergoing debt restructuring under RL regulations. Of these, 610,000 accounts were at commercial banks and non-bank institutions, while the remaining 3.1 million accounts were with specialised financial institutions (SFIs).

Accumulated loans under the RL debt restructuring programme amounted to 920 billion baht in the first quarter. Of this amount, 260 billion baht was attributed to banks and non-bank institutions, with 660 billion from SFIs.

Do you like the content of this article?