BOT to monitor loan campaigns by commercial banks to prevent aggravation of household debt situation
The Bank of Thailand (BOT) on Monday vowed not to let the household debt situation worsen by making sure that commercial banks would refrain from launching campaigns that would encourage unnecessary borrowing by consumers.
BOT Governor Sethaput Suthiwartnarueput said the central bank would seek to tackle the issue of high household debt with sustainable measures by making sure that commercial banks don’t create distorted motives for loans.
“We must make sure that commercial banks would not create a moral hazard related to household borrowings,” Sethaput said.
Ronadol Numnonda, deputy BOT governor in charge of financial institutions’ stability, said the central bank would not allow commercial banks to launch loan products and commercial campaigns that would encourage people to borrow for unnecessary consumption.
Ronadol said the central bank would issue regulations to control unnecessary borrowings in the first quarter of next year.
He said commercial banks would be told to consider funds available with the borrowers for their daily lives apart from considering their ability to repay their debt.
He added that the central bank has been trying to reduce household debt, which had been accumulating even before the Covid-19 pandemic.
Governor Sethaput added that the central banks has adjusted measures for taking care of debtors in vulnerable groups because the household debt was still as high as 88-89 per cent of gross domestic product (GDP) after it peaked at 90 per cent during the Covid-19 pandemic. During the pandemic, household debt rose by 10 per cent, he said.
He said the Bank for International Settlements suggested that household debt should not be higher than 80 per cent of GDP.
“The household debt is an issue that has been with us for a long time. There is no magic pill for curing it. It takes time to solve it, but the debtors must survive,” Sethaput said.
As one of the measures for addressing household debt, the BOT on September 3 last year asked commercial banks to restructure household debt so that they could paid back over a longer period in keeping with the debtors’ ability to repay the debt.
“Without this measure, the economy might have been disrupted,” Sethaput said.
He added that the central bank’s attempt to control household debt was one of the measures it was using to make sure the slow recovery of the country’s economy would not be disrupted. Another measure was to control the rising inflation through gradual hikes in policy interest rate in accordance with the economic situation, Sethaput said.
Meanwhile, Mathee Supapongse, BOT deputy governor in charge of monetary stability, said the central bank found that low-income people and labourers had the most household debt.
He said this group of people saw their income reduced during the Covid pandemic so the central bank would come up with specific measures to help them.
The central bank has reported that at the end of the second quarter this year, the amount of household debt rose to 14.76 trillion, but its ratio to GDP declined from 89.2 per cent in the first quarter to 88.2 per cent in the second quarter.
Household debt rose 3.5 per cent year on year, the lowest increase in 18 years, and the growth rate slowed down from 3.7 per cent year on year in the first quarter.
