Measures to curb household debt to come into effect in Jan 2024
The Bank of Thailand (BOT) will announce measures to sustainably curb household debt on Friday (July 21), which are expected to become effective in January 2024, central bank governor Sethaput Suthiwartnarueput said on Thursday.
As of the first quarter of this year, household debt stood at 16 trillion baht, accounting for 90.6% of the country's gross domestic product (GDP).
The BOT reported that the number of accounts and the total amount of overdue debts exceeding 90 days resulting from the impact of Covid-19 have gradually decreased from their peak in October 2021 due to the acceleration of specialised financial institution debt restructuring.
Sethaput said the trend of household debt indicates a gradual rise in non-performing loans (NPLs), but he believed this would not cause an NPL cliff, a situation where a lot of debt defaults occur in a very short time, forming a ”cliff” of non-performing loans.
“Financial measures and long-term debt restructuring will help prevent borrowers from slipping into NPLs too fast,” he said.
He added that special-mention loans (those overdue for more than one month but not more than three months), have a low chance of becoming NPLs, especially auto loans (12% chance) and home loans (22% chance).
“On the other hand, these special-mention (SM) loans have more than 30% chance of becoming regular loans and leaving the SM status,” he added.
Sethaput went on to say that although the chances of an NPL cliff forming are slim to none, the BOT will not be complacent about the household debt at 90% of GDP, which is well above the sustainable rate of 80%.
“It is a BOT duty to continue rolling out measures to curb the rise of household debt,” he said. “These measures, to come into effect from January next year, include increasing loans in the system and promoting responsible lending practices among financial institutes.”
He added that the BOI is also working on measures to solve chronic debts and NPLs, mainly by having banks reduce interest rates to under 15% for low-income borrowers. These measures are expected to become effective from April next year, and will also help curb the rise of household debt in the long term.
