BOT, related agencies set out to tackle household debt

Addressing a press conference on Wednesday, BOT deputy governor of financial institutions stability Ronadol Numnonda said the central bank had launched measures to deal with household debt in a sustainable manner on July 21 this year.

He said such measures would help in dealing with non-performing loans, persistent debt, new debt and informal debt effectively.

The BOT will enforce measures related to responsible lending on January 1 next year and another related to persistent debt on April 1 next year, he said

He added that the central bank is considering additional guidelines to take care of household debt, such as risk-based pricing and debt service ratio.

Ronadol said BOT had discussed the issue with related agencies so as to ensure that the measures could deal with household debt effectively and sustainably.

He said cooperation from related agencies, as well as improvement in debtors' and creditors' behaviour, were necessary to tackle the issue.

Thai Bankers' Association president Payong Srivanich said household debt impacted people's living and the country's economy.

Dealing with household debt is included in the association's three-year strategic plan, he added.

He outlined five steps to tackle household debt:

▪︎ Enabling debtors to have financial discipline and borrow loans appropriately

▪︎ Allowing debtors to access information about loans

▪︎ Setting fair lending rules among creditors, including banks, non-banks and cooperatives

▪︎ Setting up interest rate based on debtors' risks to reduce their burden

▪︎ Enabling all parties to witness mutual benefits in tackling household debt

"This cooperation is an important milestone in tackling persistent debt in the economy," he said, adding that household debt reflects various structural issues, such as decline in economic growth and income inequality.

He added that financial structure should be improved to boost economic growth, enable people to generate higher income and ensure fairness in society.

Cooperation between financial institutions would enable the BOT to achieve its goal to reduce household debt to below 80% of GDP within five years, Vithai Ratanakorn, president of the Government Financial Institutions Association, said.

Vithai, who is also director of Government Savings Bank, said the bank would work on guidelines to reduce interest rates, to help debtors be free from debt faster.

“The impact of interest rate is worrisome, and reducing the interest rate from 25% to 15% annually can save debtors," he said, adding that this move would help boost debtors' financial status and tackle household debt in a sustainable manner.

The president of the Bank for Agriculture and Agricultural Cooperatives (BAAC), Chatchai Sirilai, said 3 million borrowers were farmers who were facing difficulties in repaying due to persistent debt and ageing.

He said the bank had launched loans with a credit limit of 20 billion baht to take care of 42,000 elderly farmers, so they could be free from debt by March next year.

The BAAC would design products to support debtors who face difficulties from persistent debt and ageing, he added.