Commercial banks are expected to help restructure retail home and car loans in line with government policies, says finance permanent secretary Lavaron Sangsnit.
He said the government's retail debt restructuring programme includes a three-year suspension of interest payments.
The suspended interest during this period is to be compensated by a central pool, sourced equally from two contributions: a reduction in the Financial Institution Development Fund (FIDF) fee for banks from 0.46% of deposits to 0.23%; and resources from the respective financial institutions at a 50:50 ratio.
Mr Lavaron said the compensation mechanism for the suspended interest burden over three years should encourage financial institutions to compete to bring their debtors into the restructuring scheme.
This is because the more debtors an institution helps, the more they can utilise funds from the central pool.
For example, if a debt restructuring involves a suspension of 100 baht in interest payments, the compensation for this interest burden will come from two sources: 50 baht from the central fund and 50 baht from the financial institution's own resources.
"Therefore, financial institutions will need to compete to enrol debtors in the debt restructuring programme. Otherwise, they risk contributing to the central fund [sourced from the reduced FIDF contribution fees] without reaping any benefits," he said.
Mr Lavaron said the reduction in contribution fees to the FIDF might delay the repayment plan for the FIDF, which is nearing completion, by about two years.
However, this measure would ease the financial burden for home and car loan borrowers over the next three years, improving economic circulation as the housing and automotive sectors have extensive supply chains and significant economic impact, he said.
For borrowers paying off home or car loans, a significant portion of their financial burden comes from interest payments.
For instance, at the start of a mortgage payment with a monthly instalment of 10,000 baht, around 8,000 baht goes towards interest, with the remainder reducing the principal.
Participants in the debt restructuring scheme have their monthly interest payments suspended for three years. If the debtor chooses to make payments during this period, the amount is applied to the principal, reducing that amount quicker.
The government's retail debt restructuring programme has three groups: mortgages, car loans and small and medium-sized enterprise (SME) loans. All three groups must have overdue payments of no greater than one year, with a cut-off date for debt of Oct 31. Eligible accounts for these three groups total 2.3 million, with a total debt of 1.31 trillion baht.
For the home loan group, eligible debts must not exceed 3 million baht per person. There are 460,000 eligible accounts in this group with a total debt of 480 billion baht.
For the car loan group, eligible debts must not exceed 800,000 baht per person. This group covers 1.4 million eligible accounts with a total debt of 370 billion baht.
For the SME loan group, eligible debts must not exceed 3 million baht per account. There are 430,000 eligible accounts within this group with a total debt of 454 billion baht.