The Finance Ministry has launched an initiative to address the 3-trillion-baht debt problem facing civil servants through a model involving debt consolidation, low interest rates, and extended repayment periods.
Speaking after signing a memorandum of cooperation for the sustainable civil servant debt consolidation scheme between Krungthai Bank (KTB) and agencies within the Finance Ministry, Lavaron Sangsnit, finance permanent secretary, said the scheme aims to help vulnerable civil servants reduce their financial burden by consolidating all types of debts into KTB at a low and fixed interest rate for the duration of the contract and by extending the repayment period up to the age of 80.
After deducting the repayment amount, civil servants must have at least 30% of their salary remaining.
"This solution is considered a sustainable way to solve civil servant debt, which other government departments can adopt," said Mr Lavaron.
However, under this debt resolution model, civil servants must not incur additional debt unless their remaining salary exceeds 30%, allowing for additional borrowing capacity, but they must ensure that their remaining salary does not fall below 30%.
Payong Srivanich, KTB's president, said this project would consolidate all types of small debt, including personal loans, credit cards and home and car loans from both KTB and other financial institutions, into KTB.
Secured loans, such as home loans (with additional borrowing) and home-for-cash loans (with additional borrowing), will have a fixed interest rate of 3.5% per year for the first three years.
After that, the fixed interest rate will be 4.75% per year for the duration of the contract (the fixed interest rate for the entire contract period is 4.49% per year, calculated from a loan amount of 1 million baht with a maximum contract period of 40 years and monthly repayments of 4,700 baht). The appraisal fee for the collateral property is waived.
Unsecured loans will have a fixed interest rate of 6.75% per year for the duration of the contract. The loan conditions and criteria are determined by the bank.
According to Mr Payong, KTB has allocated a credit line of 50 billion baht for the debt resolution project for civil servants, which is expected to help alleviate the debt burden for 50,000 of them.
There are around 3 million civil servants nationwide, with a combined debt of about 3 trillion baht. Nearly half of this amount, or around 1.4 trillion baht, is owed by teachers.
The Finance Ministry itself has about 36,000 civil servants.