During an update to the press on Wednesday, Ronadol Numnonda, Deputy Governor of Financial Institutions Stability at the Bank of Thailand (BOT), revealed a series of measures aimed at tackling household debt in a sustainable way, initiatives that were initially launched on July 21 earlier in the year.
Outlined were various strategies set to handle major issues concerning non-performing debt, persistent debt, new debt and unofficial debt in a highly effective fashion. The BOT will begin implementing measures centred around responsible lending as of January 1 next year, while remedies related to persistent debt will come into effect on April 1 of the coming year.
Furthermore, Numnonda noted that considerations are underway for supplemental guidelines targeting household debt, including risk-based pricing and debt service ratio strategies. He also reassured that the BOT has actively involved relevant authorities in the conversation, to guarantee a comprehensive, sustainable and effective approach on managing household debt. The BOT deputy governor also underlined the need for collaboration between necessary agencies and an improvement in behaviour from both debtors and creditors.
Adding to the conversation, Payong Srivanich, President of the Thai Bankers’ Association, stated that household debt was a significant factor affecting the lives of citizens and the country’s economy. In line with this, the association has included plans for handling household debt in their three-year strategic map. Srivanich then enumerated five key steps to combat household debt. These steps include promoting financial discipline and education for borrowers, making information regarding loans easily accessible, introducing fair lending regulations across creditors, integrating a risk-based interest rate system to relieve the debtor’s fiscal strain, and ensuring all parties find benefit in addressing household debt.
“This collective effort is a critical progression in handling the constant debt strain in the economy,” said Srivanich. He further acknowledged the multifaceted structural issues contributing to household debt, such as a slump in economic growth and wealth disparity. The president recommended enhancements in the financial structure to stimulate economic expansion, facilitate higher individual earnings and to bring fairness into society.
Echoing the sentiment, Vithai Ratanakorn, President of the Government Financial Institutions Association, emphasized that the co-operation across financial institutions will propel the BOT to reach its goal of lowering household debt to less than 80% of GDP within a five-year timescale. Ratanakorn, who is also in charge of the Government Savings Bank, shared the bank’s initiative to make lowering interest rates a priority, which will accelerate the debt resolution process for borrowers.
“We are concerned about the implications of the interest rate, and a reduction from 25% to 15% every year can provide relief for the debtors,” elaborated Ratanakorn. He believes the move will reinforce the financial health of debtors and provide a sustainable solution for household debt.
Chatchai Sirilai, president of the Bank for Agriculture and Agricultural Cooperatives (BAAC), touched on the rural struggle with 3 million farmer borrowers who are hindered from repayment due to constant debt and aging. He revealed the bank’s initiative with a credit limit of 20 billion baht to assist roughly 42,000 elderly farmers so they can be free of debt as of March next year. The BAAC is also committed to creating designed products to mitigate the struggles faced by borrowers due to aging and persistent debt, he concluded.