Thailand
Thailand: BoT urges monitoring of debt servicing ability
The Bank of Thailand is asking financial institutions to monitor borrowers’ debt servicing ability as the second-phase debt relief measure is set to expire this month, says GH Bank president.
Vulnerable groups, deemed as borrowers that received temporary suspension of debt repayment, will undergo an examination of financial assessment by banks, said Chatchai Sirilai, president of state-owned GH Bank.
In an attempt to help struggling businesses and retail borrowers, the central bank laid out four categories of relief measures, spanning multiple types of policies such as interest rate reduction, debt payment deferment and reduction, provision of additional credit and debt restructuring.
There have been two phases of debt relief measures. The first started in April and the second in July. The aid programme is due to end this month.
The total debt amount under the central bank’s debt relief measures stood at 4.55 trillion baht or 31% of total outstanding debts in the banking sector worth 14 trillion baht as of June, according to Bank of Thailand data.
The prospect of higher bad debts is plausible because banks have been “freezing” debt repayment, said Mr Chatchai.
“As an analogy, [banks] have at least 10 refrigerators to freeze debts. We will start unplugging each refrigerator one by one when a specific group of borrowers can exit the programme, solving the problem gradually,” he said.
For GH Bank, the first lot of debtors in the first-phase debt relief scheme had debts totalling 180 billion baht. Of that amount, debts of 100 billion baht continue to be under the debt relief scheme, while 80 billion is in the settlement process.
Of the 80 billion baht, 9 billion is likely to turn into non-performing loans (NPLs) as borrowers shouldering 5 billion have yet to repay.
The bank has set aside higher loan-loss reserves to cushion against rising NPL prospects.
Of the 5.3-billion-baht reserve target, GH Bank set aside reserves worth 3.5 billion, with the remaining 1.8 billion to be gradually set aside, said Mr Chatchai.
GH Bank disbursed loans worth 156 billion baht as of Sept 30 from the 210-billion target. Further loan disbursements are anticipated this quarter, he said.
Source: https://www.bangkokpost.com/business/1997215/bot-urges-monitoring-of-debt-servicing-ability