The cabinet on Wednesday approved debt support measures, including interest suspensions and reduced principal payments, to help tackle household and small-business debt, Prime Minister Paetongtarn Shinawatra said.
The measures will help retail borrowers and smaller businesses, she told a press conference.
Finance Minister Pichai Chunhavajira told reporters the cabinet also agreed to allow banks to reduce their annual contribution to the Financial Institutions Development Fund (FIDF) to 0.23% from 0.46% of their deposits for three years.
The reduced contributions would free up funds to help banks support debtors, officials have said.
Thai banks’ non-performing loans in the third quarter rose to their highest level in three years, at 2.97% of credit outstanding, as troubled corporate and individual borrowers continued to struggle.
The FIDF is the rescue arm set up by the Bank of Thailand after the 1997 financial crisis to provides financial assistance to troubled institutions.
1.9 million debtors eligible
An estimated 1.9 million debtors with 890 billion baht in loans taken to purchase houses and automobiles, and to finance small and medium businesses from commercial banks and state financial institutions will be eligible for an interest suspension for three years, Finance Ministry and Bank of Thailand officials said at a briefing.
They will also be offered a reduction in instalments of principal to ease the overall debt burden, they said.
The government said the measures would help borrowers with debts that are up to one year overdue, covering housing loans of up to 5 million baht, car loans not exceeding 800,000 baht, and small business loans of up to 5 million baht.
Debt relief by state-owned banks will cost about 39 billion baht, which will be funded by the government, officials said. Small borrowers with outstanding debt not exceeding 5,000 baht each will have the option of paying 10% of what is due and closing the loans.
To be eligible for debt restructuring, borrowers should not have missed interest or principal repayments for more than a year as of Dec 31, 2023. Loans that were in default previously and had been restructured between January 2022 and October 2024 are also eligible for restructuring.
Borrowers who have defaulted on payments to non-bank lenders will also be eligible. Those with outstanding auto loans of less than 800,000 baht, motorcycle loans of less than 50,000 baht, personal loans of less than 100,000 baht will be allowed to pay 70% of their current instalments with loan rates of 10% less than their existing charges for three years, officials said.
The government will help finance the non-bank lenders by providing 50 billion baht in cheap loans at interest rates of 2%.
The Pheu Thai government has been trying to ease the debt burden of households, which it sees as a constraint on consumption and economic growth.
With banks turning more reluctant to lend, Thai auto production has plummeted by 20% this year and prompted the industry to slash local sales targets for a second time in November. Residential property sales are set to drop 4.4% this year, according to a research agency.
Thailand’s economy expanded by 3% in the third quarter of this year, compared with 4.95% for Indonesia and 5.3% for Malaysia.
Household debt in Thailand as of June 30 totalled 16.3 trillion baht, or 89.6% of gross domestic product.
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