Debt relief half-hearted

Debt relief half-hearted

As tens of millions of Thais are battered by the economic ravages of the Covid-19 outbreak, banks and financial companies have recently come up with "financial relief measures" to help customers going through these hard times.

But most of their offers are largely ungenerous, not inclusive and conditional. They are like temporary band-aids that come with hefty price tags.

Since January, the pandemic has brought more pain to the already struggling Thai economy. Many workers have been laid off, suspended from work or had their pay cut. Owners of small- and medium-sized enterprises (SMEs) have shut down or halted operation.

Obviously, they need financial relief in addition to government aid in order to survive both the immediate and long-term financial shocks. A freeze on mortgage and loan payments could offer them genuine relief. It could help them avoid the prospect of foreclosures, having their cars or motorbikes confiscated, or defaulting.

But most financial institutions are still finding it hard to put aside their profit-oriented mindset and offer really good deals to their customers.

Instead of offering deferrals on principal and interest payments on residential mortgages, auto and business loans for a long or indefinite period, the majority of banks and financial companies have come up with packages which are tailor-made to ensure handsome profits will still go into their pockets.

For instance, banks are offering three-month deferrals on principal payments for mortgages and loans. That means their cash-strapped customers are still obligated to pay interest. Some banks may have given longer deferral periods, from four to 12 months. Still, the interest must be paid.

And these are not offered automatically. Customers still have to file their applications and wait for approval.

Even though state-run Government Savings Bank and Krungthai Bank have given better deals with automatic deferrals on both principal and interest payments, the offers last for just three months. And like other banks, these measures are subject to conditions. Only mortgages of no more than three million baht and SMEs loans of no more than 20 million baht are eligible. The rest are left to deal with their own financial problems.

Additionally, most banks have offered cuts on minimum payments for personal and credit card loans for a period of a few years. Nothing more.

These lenders' assistance could have been more generous and more inclusive, covering a longer period of time as it may take months, or even years, for many people to bounce back from this economic catastrophe. A World Bank report released this week warned that the outbreak could devastate economic growth and increase poverty across Asia -- with Thailand highlighted as being the worst-hit country in Southeast Asia.

Banks and financial institutions in other countries have set good examples for what genuine relief measures can be like. Major banks in Canada, for instance, are offering mortgage deferrals for an indefinite period, among other assistance measures, to their customers. Singapore's central bank recently announced that financial institutions will offer a freeze on principal and interest payments on mortgage and business loans, until the end of the year.

Applying the same measures would not be too costly for Thai lenders, because they could still earn accrued interest from outstanding balances. They could also apply strict oversight to ensure customers resume their payments as soon as they can.

Editorial

Bangkok Post editorial column

These editorials represent Bangkok Post thoughts about current issues and situations.

Email : anchaleek@bangkokpost.co.th

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