Thailand
Thailand: SME NPLs may reach 10% in year ahead
Non-performing loans (NPLs) of small and medium-sized enterprises (SMEs) next year are expected to rise to 10% from 6% at present if relief measures by financial institutions are not extended from the end of this year, says Export-Import (Exim) Bank of Thailand president Rak Vorrakitpokatorn.
The expirations could adversely affect SMEs still struggling with the severe impact of the pandemic, he said.
However, this possible NPL hike in the SME sector should not impact the strong financial status of Thai financial institutions, said Mr Rak.
NPLs in the SME sector account for 6% of total loans provided to the sector.
He said out of 3 million SMEs in Thailand, 500,000 have ceased operation.
Another 500,000 can only continue operations because they are still supported by government financial measures, said Mr Rak.
Once these lifeline measures expire, they are unlikely to be able to continue operations, he said.
These 500,000 struggling SMEs might turn to loans from other sources, such as nanofinance providers, which charge high interest rates of around 20%.
If after receiving new loans the SMEs can maintain operations, they might return to seek bank loans later, said Mr Rak.
Exim Bank expects its total NPLs to tally 3.58% or lower of total loans at the end of this year.
He said the bank is ready to offer a debt haircut to borrowers if it is allowed to do so by the government.
However, the bank will have to set criteria for granting the haircut and the amount of the debt write-off will not be the same for all borrowers, said Mr Rak.
For example, for borrowers to qualify for a haircut they must be long-time customers of Exim Bank, he said.
If customers have been with the bank for seven years, the bank might write off their debt by 25%, said Mr Rak.
If they have been with the bank for 7-10 years, the haircut might be 30%, he said.
Source: https://www.bangkokpost.com/business/2223191/sme-npls-may-reach-10-in-year-ahead