(CTN News) – The Bank of Thailand (BoT) is taking proactive steps to address Thailand’s rising household debt, which currently stands at 90.7% of the country’s Gross Domestic Product (GDP).
This growing debt burden has been exacerbated by a series of crises, including the COVID-19 pandemic, which have left many individuals and businesses struggling with mounting debts.
To tackle this issue, the Bank of Thailand is planning to implement four strategic measures aimed at reducing household debt to around 80% of GDP. In this article, we will delve into these measures and their potential impact on Thailand’s economic stability.
Responsible Lending (January Implementation):
The first measure, scheduled to take effect in January, emphasizes the importance of responsible lending. Under this initiative, financial institutions will be required to exercise caution and responsibility when extending loans.
This involves a thorough assessment of the borrower’s existing household debt, ensuring that new loans do not exacerbate their financial strain. By implementing responsible lending practices, the Bank of Thailand aims to curb the issuance of loans that could lead borrowers further into debt.
Tackling Chronic Indebtedness (April Implementation):
A significant challenge in Thailand is chronic indebtedness, where borrowers can only afford to repay the interest on their loans and not the principal amount. This predicament leaves them incapable of fully settling their debts.
To address this issue, the Bank of Thailand plans to introduce a measure in April that focuses on personal loans. Debtors will be granted access to financial institutions, allowing them to refinance their personal loans over a five-year period.
The maximum interest rate for these refinanced loans will be capped at 15%. This measure is expected to provide relief to individuals trapped in a cycle of interest-only payments.
Risk-Based Pricing (RBP):
One of the strategies the Bank of Thailand intends to employ is risk-based pricing (RBP). This approach aims to offer debtors access to new funding with lower interest rates, enabling them to pay off their debts more efficiently.
By tailoring interest rates to individual borrower risk profiles, the Bank of Thailand hopes to make it easier for those with high debt levels to secure more manageable financing, thereby reducing their overall debt burden.
The Bank of Thailand‘s commitment to reducing household debt is driven by the need to enhance economic stability and alleviate the financial stress faced by many households and businesses in the wake of recent crises.
These measures, scheduled for implementation over the coming months, offer a multi-faceted approach to address the various facets of the debt issue, from responsible lending practices to refinancing options and risk-based pricing. As these measures take effect, Thailand anticipates a more stable financial landscape and improved prospects for its citizens.