The government has greenlit a scheme to tackle small borrowers’ debt problems, enabling them to re-enter the formal financial system and ease their repayment burden.
Speaking after the economic cabinet’s meeting, chaired by the premier on Monday, Finance Minister Ekniti Nitithanprapas said the gathering approved a plan to resolve the debt problems of retail borrowers.
Under the latest debt resolution plan, these debts will be transferred to the state-owned asset management companies (AMCs) Ari AMC and Sukhumvit Asset Management (SAM).
Retail borrowers with total debt below 100,000 baht and classified as non-performing loans (NPLs) amount to 4.76 million accounts held by about 3.5 million individuals, with total outstanding debt of around 122 billion baht.
In the first phase, the transfer will cover 2.56 million NPL accounts from commercial banks, representing about 1.25 million borrowers and total debt of 43.6 billion baht. These debts will be transferred to SAM. Another portion consists of 790,000 accounts from specialised financial institutions (SFIs), representing about 700,000 borrowers and total debt of 18.8 billion baht, which will be transferred to Ari AMC.
The remaining portion, consisting of retail borrowers from non-bank institutions, will be handled in the next phase.
ARI-AMC is a joint venture between Government Savings Bank (GSB) and Bangkok Commercial Asset Management Plc.
Funding comes from the remaining 26 billion baht of the government’s “Khun Soo Rao Chuay” (You Fight, We Help) debt relief programme.
Vitai Ratanakorn, governor of the Bank of Thailand, said tackling small borrowers’ debt problems is part of addressing Thailand’s structural household debt issue, which stands as high as 87% of GDP.
He said this debt resolution initiative is intended to be a one-time solution for borrowers with debts incurred up to Sept 30 this year. The restructuring process will include waiving penalties and partially writing off the principal, while allowing borrowers to repay over an extended period.
If the AMCs generate profits from this process, there will be a profit-sharing mechanism with the original creditor financial institutions. Mr Vitai emphasised that the AMCs themselves do not aim to make a profit from this programme.
According to finance permanent secretary Lavaron Sangsnit, borrowers whose debts are transferred to AMCs and who make repayments in accordance with the agreed terms — even for just 1-3 months of consistent payments — will be eligible to apply for loans from GSB without having to wait for a full three-year record of good credit history.