THE BANK of Thailand has joined forces with 16 commercial banks and Sukhumvit Asset Management Co (SAM) to set up clinics to clear up non-collateral debt problems with several creditors amid high levels of household debt.
The signing ceremony took place yesterday. The debt-solving clinics will be opened for registration on June 1, with SAM acting as an intermediary to solve the |problems of debtors who have several creditors.
BOT Governor Veerathai Santiprabhob said the debt-solving clinics would help relieve the household debt problems that have heightened over the past two to three years.
Although, based on recent data, the proportion of household debt fell from 81.2 per cent of gross domestic product in 2015 to 79.9 per cent at the end of 2016, the figure remains high.
Participating in the programme are Bangkok Bank, Krungthai Bank, Bank of Ayudhya, Kasikornbank, Kiatnakin Bank, Citibank’s Bangkok branch, CIMB Thai Bank, TMB Bank, Tisco Bank, Thai Credit Retail Bank, Siam Commercial Bank, Thanachart Bank, United Overseas Bank (Thai), Land and Houses Bank, Bank of China (Thai) and ICBC Bank (Thai).
A study by the Puey Ungphakorn Institute for Economic Research and the National Credit Bureau (NCB) found that even young Thais have been seeing their debts go bad. According to NCB data, half of 30-year-old people hold debts, mostly personal and credit-card loans.
Many Thais have long-term loans and shoulder high debt levels throughout their working lives, and the debt level does not get lower as they approach retirement. Based on NCB data, the median debt per person surged from Bt70,000 in 2010 to Bt150,000 in 2016.
Debtors in the NCB system have fragile financial status. About 16 per cent of debtors or about 3 million persons have been at least 90-days overdue for repayment, reflecting a lack of discipline and financial-management skills.
Initially, the debt-clinic scheme will extend to only non-collateral personal loans that have attained bad-debt status with two or more commercial banks participating in the programme. Bad-debt status means debts overdue by more than 90 days before May 1 this year.
Based on NCB data, there are about 500,000 people with debts worth more than Bt100 billion in this group.
“In the initial period, this scheme will solve only debts extended by commercial banks,” Veerathai said. “Later, it will be broadened to those lent by non-bank financial institutions if the legal amendment for SAM to manage [such] debts is completed. The Cabinet has given the green light on this, which is in the process of Council of State consideration.”
The BOT began witnessing a decline in the ratio of household debts to GDP last year. Some debts with the previous elected government’s first-car tax-incentive programme have gone down gradually. However, monitoring on new borrowings is still required.
“Financial institutions have been more cautious with extending personal loans. And if the GDP improves clearly with no interruptions, we believe the level of household debt will decline at a gradual pace,” Veerathai said.
Cap on lending rates
Those who take part in the debt-clinic programme will be levied lending rates at no more than 7 per cent per annum.
Predee Daochai, chairman of the Thai Bankers’ Association and president of KBank, said the scheme would solve bad debts for several institutions simultaneously. SAM will manage the debts, allowing debtors to make payments at the rate of no more than 7 per cent for the long term, with instalments appropriate to each case.
Participating debtors will not be permitted to make new borrowings except for recognised emergency cases.
In the initial period, SAM branches will be used, and later, bank branches may be used.
About 60,000-70,000 KBank customers are qualified for the scheme with total debts outstanding of Bt3 billion to Bt4 billion.
Pongpen Ruengvirayudh, chairman of SAM, said the company had prepared a system for the debt-solving clinics and interested debtors could contact the company at its head office or one of its four branches in Chiang Mai, Khon Kaen, Surat Thani and Phitsanulok.