Thai Bankers’ Association proposes measures to deal with NPLs
Interest suspension, debt restrictions to help individuals and SMEs avoid foreclosures
The Ministry of Finance has held discussions with the Thai Bankers' Association to address household-debt solutions, particularly for special mention (SM) debtors and those with non-performing loans (NPLs) overdue for less than a year, about a million individuals.
The aim is to enable debtors to resume loan repayments and access formal financial services.
Piti Tantakasem, chief executive of TMBThanachart Bank (TTB), shared that initial discussions among the ministry, the Bank of Thailand (BOT), and the Thai Bankers' Association focused on assisting debtors with housing and auto loans, as well as small and medium-sized enterprises (SMEs) that are unable to make payments on loans overdue for less than 360 days.
The assistance plan operates on two main principles:
Support for Debtors Unable to Make Payments: Eligible debtors will only need to pay the principal, with interest suspended. If they comply with the criteria and duration, typically around three years, the suspended interest will be waived.
Temporary Debt-Freezing Requirement: Debtors in the programme must refrain from incurring new debt for a designated period. If they fail to do so, they forfeit the suspended interest waiver, reverting to a non-performing loan status.
“This measure mainly aims to help small individuals who are willing but struggling to repay due to prolonged issues from Covid-19 and the current economic challenges,” Piti explained.” We want to avoid repossessing homes or vehicles, as SMEs rely on these assets for their operations and livelihoods.
“This debt is already categorised as NPL, and repossession would be the next step. However, the measures come with necessary conditions. Without restricting new debt accumulation, we can't resolve household debt issues effectively, nor can we prevent intentional defaults or misuse of this relief.”
Piti further explained that this intervention is like treating a cancer patient with chemotherapy. While it’s understood that there will be side effects, it offers a chance for debtors to recover and return to normal life or work. However, he noted that some may not recover fully because of the severity of their situation.
"Those intending to stop payments just to receive an interest suspension should avoid joining the programme, as it comes with strict debt-management conditions," Piti said.
Details and procedures of the measure, including compensations for banks facing lost income, will be clarified by the Ministry of Finance and the BOT soon. They aim to release guidelines quickly, as Thailand's household-debt situation is severe.
He emphasised that all parties must contribute to prevent further deterioration. High debt levels lead banks to tighten lending, which in turn stifles the economy. With these measures, along with the government’s economic stimulus efforts, he believes the overall situation will gradually improve.
