September 28, 2022

BoT prepares a new debt mediation event

Seven retail loan products included

Unsecured loans, such as credit cards and personal loans, are of concern to the central bank. (Photo: Varuth Hirunyatheb)

The Bank of Thailand plans to hold a new debt mediation event in a bid to ease the country’s growing household debt and help vulnerable borrowers restructure their debt amid an uneven economic recovery.

Ronadol Numnonda, deputy central bank governor, said yesterday that household debt stood at 14.6 trillion baht.

The central bank has expressed concern about certain loan products, particularly unsecured loans such as credit cards and personal loans, which account for 23% of total household debt.

Secured loans, which improve consumer welfare and create careers for people, account for a large portion of household debt, Ronadol said.

Secured loan products include mortgages, auto loans, and commercial loans for entrepreneurs or small businesses.

The impact of the pandemic over the past two years has pushed the household debt ratio from 80% of GDP in 2019 to 90% in 2021. This increase in the household debt ratio is mainly attributed to the decline of nominal GDP by 7% over the same period. the period, while lending to households increased, he said.

The central bank, in collaboration with the Ministry of Finance and other public and private sector organizations, has scheduled the online debt mediation event from September 26 to November 30.

Seven types of personal loan products are included in debt mediation, including credit cards and personal loans; automobile loans; bad debts of asset management companies (AMCs); car title loans; motorcycle loans; nanofinance; and all Specialized Financial Institution (SFI) loan products.

There are 56 financial institutions registered to participate in the debt mediation event, including commercial banks, non-banks, AMCs and SFIs.

Mr. Ronadol said the number of participating creditors is expected to increase.

At the last three debt mediation events, about 80% of participants have joined debt restructuring programs, he said.

The central bank wants borrowers, who cannot be contacted by their financial institutions, to join this event or enter into the normal debt restructuring programs offered by their financial institutions, Ronadol said.

He said the Bank of Thailand would help viable but fragile borrowers with debt restructuring as an instrument to ease the household debt problem.

Many borrowers during the pandemic entered into debt restructuring plans and most emerged successfully, Ronadol said. Some of them still need financial assistance as they have a higher cost of living, but their incomes have not returned to normal amid the uneven economic recovery, he said.

The central bank plans to maintain debt relief measures until the end of next year.

As of June 30, there were 3.89 million loan accounts in debt relief programs, representing 2.89 trillion baht in loans.

In addition, the central bank has extended its long-term debt restructuring program until the end of 2023.

Ronadol said the central bank plans to implement responsible lending guidelines this year after releasing a responsible lending framework to contain the country’s household debt.