Household debt tackled by Bank of Thailand with new guidelines

The Bank of Thailand (BoT) is set to introduce new lending guidelines to counter the rising household debt crisis, particularly among Gen X and Gen Y age groups, according to Assistant Governor Siritida Panomwon Na Ayudhya. The central bank is also working on a draft royal decree to supervise leasing and hire-purchase businesses to resolve informal debt issues.

From 2010 to 2021, household debt in the country surged from 60% to 90%, largely due to the pandemic’s impact. Siritida stated that this rising debt could weaken the financial and economic system, especially among low-income earners. She added that the BoT would be closely monitoring the situation and applying responsible lending guidelines to better loan quality.

Furthermore, the Bank has given Sukhumvit Asset Management Co (SAM) the task to increase the number of participants in its “Debt Clinic Project by SAM” by 50,000 in 2022. Since 2017, the project has seen 300,000 customers take part, with 40,000 qualifying for debt restructuring. SAM President Tharatporn Techakitkachorn noted that almost all debt clinic participants are from Gen X and Gen Y age groups, with many struggling to repay their debts due to the economic crisis, reported Bangkok Post.

At the end of the fourth quarter of 2022, household debt stood at 15.09 trillion baht (US$452.53 billion), representing 86.9% of GDP. Established in 2000, SAM was created in response to the high volumes of bad debts following the regional financial crisis of the late 1990s and is wholly owned by the Financial Institution Development Fund.

Siritida acknowledged that the central bank’s recent interest rate hikes would not significantly affect debtors’ repayments. She explained that these increases were gradual, and any debtor entering SAM’s debt relief programme would benefit from lenient interest rates designed to assist borrowers in repaying their debts.

In recent news, household debt levels in Thailand have risen sharply, reaching 86.9% of GDP. This situation paves the way for discussions and actions surrounding financial stability and long-term economic growth, along with promoting responsible spending habits among consumers. In response to these challenges, the BoT is dedicated to implementing measures that will strengthen debt repayment capabilities, support prudent financial management, and increase the overall affordability of living expenses for Thai households. Read more HERE.