Banks preparing to suspend interest fees

The Thai Bankers’ Association (TBA) is implementing a new debt restructuring programme covering borrowing valued at 1.4 trillion baht, aimed at alleviating household debt over three years.
Speaking at a meeting of the Joint Standing Committee on Commerce, Industry and Banking on Wednesday, TBA chairman Payong Srivanich said the group is preparing to suspend interest payments for vulnerable borrowers, including those with mortgages, auto loans and small business loans, as part of a targeted relief measure.
Auto loan borrowers eligible for debt relief can have a maximum credit line with a financial institution of 700,000 baht each.
The maximum credit line for mortgages and small business loans is set equally at 3 million baht each.
The interest payment suspension is available for three years and will target the most vulnerable borrowers, according to Mr Payong.
Vulnerable borrowers eligible for the scheme are facing difficulties with debt repayment.
The criteria for identifying such borrowers will be clarified at a later stage, he said.
According to data from the National Credit Bureau, the total value of special mention loans and non-performing loans combined is about 1.4 trillion baht.
“The interest payment suspension is a short-term measure to ease household debt over three years,” said Mr Payong.
“This will be a starting point for the country’s debt relief, which will expand later as the government sets a broader economic policy for long-term sustainable growth.”
He said the programme requires approval from regulatory agencies and the cabinet, adding it is expected to be implemented next year.
The private sector plans to meet with the Bank of Thailand on Nov 14 to discuss the debt relief programme.
Mr Payong said the TBA also plans to establish a three-year fund to manage household debt.
The funding for the interest suspension scheme will come from a reduction in the Financial Institution Development Fund (FIDF) fee contribution for banks, along with contributions from banks, according to the TBA.
The Finance Ministry will allow banks to lower their fee contribution to the FIDF to 0.23% of deposits, down from the current level of 0.46%.
The remaining 0.23% will likely be used to contribute to the new fund, with additional support from banks to enhance the debt measure, noted the TBA.
To avoid moral hazard and ensure the effective reduction of household debt, borrowers who benefit from the suspension must adhere to the debt restructuring plan and refrain from incurring new loans over the three-year period.
Eligible borrowers must have signed their loan contracts with banks before Jan 1 of this year and must be facing challenges with their loan repayments, based on debt data as of Oct 31.
The initiative is designed to help targeted borrowers reduce their debt burden and encourage financial discipline throughout the restructuring period, according to the TBA.