Measures afoot to aid loan defaulters
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Measures afoot to aid loan defaulters

Ministry taking necessary steps

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People examine loan deals on offer at the Money Expo 2024 held at Impact Muang Thong Thani. (Photo: Varuth Hirunyatheb)
People examine loan deals on offer at the Money Expo 2024 held at Impact Muang Thong Thani. (Photo: Varuth Hirunyatheb)

The Finance Ministry is preparing measures to assist debtors who have defaulted on their home and car loans after a rise in non-performing lending in these segments.

According to finance permanent secretary Lavaron Sangsnit, the ministry is currently discussing measures to help debtors struggling with home and car loan payments to enable them to continue with their repayments.

At the same time, these measures would help reduce the issue of non-performing loans for financial institutions.

Mr Lavaron noted that over the past 1-2 months, the Finance Ministry has been monitoring the situation of home and car loan debtors and found that there has been an increase in repayment difficulties in those segments. Therefore, to prevent the issue from escalating further, the ministry is seeking ways to provide assistance.

He said the ministry is in the process of designing how to best support these debtors, while acknowledging that if the assistance were provided through normal mechanisms, such as settling debts on behalf of debtors, it could create a moral hazard or incentivise debt defaults. Therefore, the ministry aims to design measures that minimise such risks.

According to Mr Lavaron, the proposed measures are not intended to stimulate purchasing power in the real estate sector, but to provide breathing room for debtors.

However, he acknowledged that many people are unable to obtain home and car loans, resulting in a slowdown in new loan growth, which is related to the stricter lending criteria of financial institutions.

Meanwhile, a Finance Ministry source who requested anonymity said that private sector investment in the second quarter contracted sharply, mainly due to a decline in commercial vehicle investments, as financial institutions have tightened their lending. The National Economic and Social Development Council reported that overall investment fell by 6.2% in the second quarter, following a 4.2% decline in the first quarter of this year.

Regarding fiscal measures to support the economy later this year, the source said the focus will be on two main groups -- vulnerable populations and middle-income and higher middle-income groups. For the vulnerable group, the Finance Ministry will support the distribution of 10,000 baht to around 14 million people holding state welfare cards and people with disabilities.

This is part of the government's digital money handout scheme, with funding coming from an additional 122 billion baht in fiscal budget 2024.

For the middle-income and higher middle-income groups, measures will include the sale of investment units in the Thai ESG Fund, with tax incentives, and the sale of units in the Vayupak Fund, which will inject more than 100 billion baht into the economy through the capital market.

For investment in Thai ESG Fund units, the legislation is currently being drafted by the Revenue Department. However, investors can purchase the investment units immediately, and the law would be applied retroactively for investments made throughout the entire year.

Additionally, the source said the government will disburse funds from the 2025 expenditure budget, totalling 3.75 trillion baht, which will come into effect on Oct 1.

A portion of this budget will be disbursed in the fourth quarter of this year.

Therefore, in the fourth quarter of this year, over 300 billion baht will be injected to stimulate the Thai economy.

For next year, the Finance Ministry also plans to introduce additional economic stimulus measures, depending on when the government decides to implement them, the source said.

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