TBA to the rescue: Thai bankers roll out debt relief plan

The Thai Bankers’ Association (TBA) is set to roll out a major debt restructuring programme to provide much-needed relief to the country’s household debt crisis.

The scheme, expected to span three years, will focus on borrowers with a staggering 1.4 trillion baht in debt, covering everything from mortgages to auto loans and small business borrowings.

In a bold move to tackle mounting financial pressures, the TBA will suspend interest payments for those in financial distress, giving vulnerable borrowers some breathing space. The announcement was made by TBA chairman Payong Srivanich during a recent meeting of the Joint Standing Committee on Commerce, Industry, and Banking.

The new programme is designed to help those facing the toughest financial challenges. Payong revealed that it will primarily target borrowers with a credit line of up to 700,000 baht for auto loans and 3 million baht each for mortgages and small business loans, reported Bangkok Post.

“The interest payment suspension is a short-term measure to ease household debt over the next three years,” Payong stated, highlighting that the initiative is just the first step in a broader plan to relieve the nation’s debt burden.

Although the specific criteria for who will qualify for the programme are yet to be announced, Payong assured the public that it would be targeted at those most in need. The latest figures from the National Credit Bureau show that the combined total of special mention loans and non-performing loans stands at a jaw-dropping 1.4 trillion baht, said Payong.

“This is the starting point for the country’s debt relief plan. The programme will expand over time as the government implements broader economic policies aimed at sustainable long-term growth.”

Before it can be fully rolled out, the programme requires approval from the government and the Bank of Thailand. A critical meeting is scheduled for November 14, when the details of the plan will be discussed further. If all goes to plan, the debt relief initiative is expected to launch sometime next year.

The TBA also plans to establish a special three-year fund to help manage the household debt situation, with funding coming from a reduction in the Financial Institution Development Fund (FIDF) fee.

The Finance Ministry has agreed to allow banks to halve their FIDF contribution to 0.23% of deposits, down from the previous 0.46%. This reduced contribution will provide the necessary capital for the debt relief fund, alongside additional support from the banks themselves.

While the scheme will offer short-term respite, the TBA has made it clear that borrowers must stick to strict conditions. Those who benefit from the interest suspension will be required to adhere to the debt restructuring plan and avoid taking on any new loans during the three years.

To qualify, borrowers must have signed their loan agreements before January 1, 2024, and must be facing repayment difficulties as of October 31, 2024.

The TBA has stressed that the programme is aimed at reducing the debt burden for eligible borrowers while promoting financial discipline throughout the restructuring period.

With household debt at crisis levels, the TBA’s debt relief scheme offers a lifeline to millions. While the full details are still to come, this bold initiative is a crucial first step towards tackling one of Thailand’s most pressing financial challenges.