Bank of Thailand considers interest rate cuts to address household debt

A senior executive at the Bank of Thailand hinted at the possibility of interest rate slashes, which could provide a lifeline to struggling debtors, desperate to escape from their worsening debt cycles. In talks with the Thai Bankers’ Association (TBA) and other related groups, the central bank is exploring various methods to curb the nation’s escalating household debt.

According to the central bank’s deputy governor, Ronadol Numnonda, such cuts could provide a reprieve for burdened borrowers who have been shouldering persistent debts for a considerable period. He revealed that this month, the regulator plans to introduce three initiatives focused on responsible lending, risk-based pricing, and macroprudential policy, aimed at resolving the nation’s troublesome household debt situation. Following this, Ronadol announced, the central bank would hold a public hearing on these three proposals.

While discussing the proposed rate reductions, TBA chairperson, Payong Srivanich, noted that all stakeholders should consider the potential repercussions, as it could result in a moral hazard. He suggested a thorough examination of responsible lending by financial bodies, the provision of equal and fair access to finances, and an analysis of borrowers’ debt repayment capabilities as possible countermeasures to the household debt issue.

During yesterday’s meeting of the Joint Standing Committee on Commerce, Industry and Banking, Payong stated that financial institutions would assist borrowers to enhance their financial discipline. He urged that the forthcoming government should tackle the household debt predicament via economic policies designed to advance the labour market and increase public income. Payong also announced that businesses were eager to cooperate with the new government to promote economic growth and reduce household debt.

In another key development, Payong disclosed the TBA’s plan to hold discussions with the central bank and National ITMX Co Ltd, the providers of digital payment infrastructure systems for commercial banks, to refine digital banking services following the recent digital glitch on Saturday. He suggested that the central bank isolate digital transactions from essential financial operations and occasional transactions, to lessen the traffic during peak periods. He said…

“Occasional transactions, like on lottery days, can result in an enormous flow and could lead to a system shutdown.”

Contrary to reports, Payong stated that the banking sector didn’t have issues in terms of mobile banking service capacity.

The current capacity for digital banking services amounts to 10,000 transactions per second while the actual usage during peak periods is merely 3,000 transactions per second, Payong explained. He further noted that Banks were prepared to help vulnerable low-income borrowers through comprehensive, long-term debt restructuring if they were impacted by increasing interest rates, reports Bangkok Post.