The Government Savings Bank (GSB) has formed a joint venture with Bangkok Commercial Asset Management to tackle household debt, the state-owned lender said on Wednesday.
The joint venture is expected to manage 45 billion baht (US$1.23 billion) of debt across about 500,000 accounts, the bank said in a statement, adding the firm would operate for up to 15 years.
The move comes as the government led by the Pheu Thai Party attempts to tackle soaring household debt, at around 91% of gross domestic product (GDP), among the highest in Asia.
Use of illegal loan sharks is rife among lower-income families who are unable to get bank loans, with many people trapped by debt with high interest rates.
Earlier this year, the government announced measures to manage debt both in and outside the financial system.
The Bank of Thailand (BoT) has issued guidelines allowing state banks to form joint ventures with the private sector to establish asset management companies to manage debt and non-performing loans (NPLs).
The high debt has weighed on Southeast Asia's second-largest economy, which is also facing decade-high borrowing costs and weak exports amid a slow recovery in top trading partner China.
The National Economic and Social Development Council (NESDC) reported economic growth of just 1.5% year-on-year for the first three months.
The state planning agency expected gross domestic product (GDP) growth of between 2% and 3% for the year, slightly lower than its previous forecast of 2.2% to 3.2%. Last year’s growth was 1.9%.
The downgrade reflects higher levels of external risk, especially trade protectionism that is intensifying, geopolitical conflicts and increasing volatility in the global economy, the NESDC said.
Prime Minister Srettha Thavisin has said that without the service and tourism sectors as cushions, Thailand would now be at risk of a recession. There is also credit card debt, bad debt and household debt that needs to be addressed, he said.