Thailand lays out measures to ease household debt crisis

Over 10 million Thai debtors are said to be facing repayment problems.

Thailand has outlined plans to help ease the country’s household debt problems, which reportedly afflicts over 10 million people in the country.

Beginning 1 January 2024, debtors– individuals as well as small and medium enterprises– who face repayment difficulties and have never undergone debt restructuring will be offered debt restructuring solutions.

Creditors, meanwhile, are directed to offer a product program from debtors starting to face repayment difficulties but are not yet classified as a non-performing loan; and debtors already classified as non-performing loans (NPL).

Thailand’s household debt is amongs the highest in Asia, second only to South Korea. As of mid-2023, the household debt to GDP ratio is a whopping 91.5%, according to data from the Bank of International Settlements.

Household debt woes are estimated to afflict over 10.3 million people in Thailand, according to Prime Minister Srettha Thavisin in a speech on December 2023. His adviser, Kittiratt Na-Ranong, reportedly said that the country’s household debit is no worth S$603.3b (THB16t). 

Debtors with credit cards and personal loans that are more than 120 days overdue can apply to for the  Debt Clinic program. The program allows Thai debtors to repay principal in installments over a maximum period of 10 years, at an interest rate of only 3% to 5%. 

All incurred interest charges will be forgiven once the debtors fully repay their debts under the new terms, the Bank of Thailand (BOT) said.

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Interest burden
The BOT is also launching programs meant to reduce interest burden for those with revolving personal loans under supervision that are not yet classified as NPL.

Beginning 1 April, debtors with personal loans under supervision– excluding auto loans, digital personal loans, and credit card loans– and have a proportionately higher interest payment than the principal payment over the past 3-5 years, can have their debts converted into installment loans that can be paid back in 5 years and with interest rates not exceeding 15% per annum. 

The above-mentioned debtors who pay proportionately higher interest payment than principal payment over the last 5 years and have monthly income of less than THB20,000, or less than THB10,000 will be able to opt-in to a program for resolving persistent debt.

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‘Fairer’ market
The BOT is also planning to take action to ensure that debtors are “charged with fairer interest rates and fees; and receive important information that is accurate, comprehensive, comparable, and promotes sound financial discipline.” 

No prepayment fees shall be applied for all types of personal loans, except for mortgage refinancing during the first 3 years.  

Debt restructuring fees are also forbidden. Exceptions are fees collected on collateral appraisal to determine appropriate debt restructuring terms. 

No interest rates shall be charged on interest charges that are incurred for all types of retail loans including overdraft loans, effective 1 July 2024.

Creditors are also asked to provide debtors with important information that are accurate, comprehensive and comparable. These include posting a warning to “borrow when necessary and within your means”, announcing both the lowest and highest applicable interest rates per annum in advertisement, notifying debtors when installments or interest charges would increase. All these are effective 1 July 2024.