NPL crisis due to Covid-19 'worse than 1997 meltdown'
The present Covid-19 crisis was worse than the Tom Yam Kung crisis of 1997, the Bangkok Commercial Asset Management (BAM) has said, adding that non-performing loans (NPL) was of concern for Thailand’s economic system.
BAM explained that financial institutions in 1997 had a low rate fund to deal with NPLs in the economic system. Moreover, the household debt at that time was low, and small businesses were not affected by the crisis.
The Coivd-19 crisis has affected everyone, whether large or small businesses. However, financial institutions have a reserve fund to deal with economic problems of the future. BAM added that they will not bankrupt easily as in 1997.
BAM chairman Bunyong Visatemongkolchai said that NPLs this time were one of most worrying issues. He said that total NPLs in the system were now around Bt500 billion, or 3.05 per cent of total credit in the system. However, these NPLs will increase, after banks' measure to suspend people’s debt payment that ended recently.
The chairman explained that total debt registered in this suspension was around 40 per cent of total credit in the system, and this was too much.
Further, an estimation previously pointed out that 20 per cent of registered debt would become NPL in the future. This will increase the total NPL from Bt500 billion to Bt2 trillion, which will be like the total NPL in 1997.
However, the chairman thought that the NPL would not totally emerge in the credit system, since banks have a procedure for tackling this predictable problem. Besides, the government’s measures would help or support banks in dealing with the NPL problem, he said.
