Debt Clinics See a 43% Increase in Applications as Household Debt Soars in Thailand

Thailand’s household debt is expected to exceed 16.9 trillion baht, or 91.4% of GDP, by the end of the year, with non-performing loans (NPLs) in the banking system likely to be around 152 billion baht, according to TMB Thanachart Analytics.

The 3.4% growth was lower than the previous year, owing to commercial banks’ stricter lending practices. However, credit card loans, leasing, and personal loans grew at a faster rate, increasing household debt exponentially.

Non-performing loans in the banking sector increased by 2.79% to around 152 billion baht, while outstanding auto lease repayments due in 1-3 months totaled over 170 billion baht, excluding lending by non-bank organizations and special financial institutions (SFIs).

According to Surapol Opasatien, chief executive of the National Credit Bureau, the amount of debt under legal procedure is rapidly approaching Thailand’s total household debt of 16 trillion baht and the country’s GDP of 17 trillion baht.

As of November 2023, there were 2,674,081 debt-related cases totaling 15.99 trillion baht. The creditors have already received verdicts in 1.05 million cases totaling around 15 trillion baht, but they have yet to begin the legal execution process, according to Mr. Surapol.

Household Debt leads to Debt Clinics

Approximately 691,000 cases, totaling 761 billion baht, are currently undergoing the legal execution process. Surapol added that this might result in the debtors being compelled to sell their homes, automobiles, or other possessions to pay off the loan.

He stated that the number of retail borrowers seeking assistance through the central bank’s Debt Clinic programme increased by 43% in the first quarter, indicating a greater determination among financially disadvantaged individuals to handle non-performing loans (NPLs).

According to Sukhumvit Asset Management (SAM), the country’s second-largest asset management business in charge of the Debt Clinic, a total of 20,267 individual debtors applied for the scheme meant to restructure unsecured loans, a 43% rise over the previous year’s first quarter.

Of these applicants, 14,311 were determined to be eligible for aid, marking a significant 58% increase year on year. Among them, 7,145 borrowers with combined principle loans totaling 1.62 billion baht chose to engage the debt restructuring process.

Currently, 46,720 unsecured loan debtors are undertaking debt restructuring, accounting for 129,959 loan accounts and 9.46 billion baht in outstanding debts.

On average, the loan line per borrower is between 5,000 and 200,000 baht, with an average monthly debt installments of 2,470 baht. The longest restructuring time is 92 months.

Debt Restructuring

The majority of the participants in the debt restructuring project are from Generation Y, accounting for 65% of the total, with the remaining 35% from Generation X.

According to Nartnaree Rattapat, president of SAM, the number of NPL debtors who have chosen to engage in the Debt Clinic programme rather than seek legal action has steadily increased.

This suggests that borrowers are paying greater attention to debt solutions after the household debt crisis impacted their daily lives, she said.

The joint efforts of many stakeholders, including the Bank of Thailand and 32 financial institutions involved in the debt restructuring initiative, have been critical in tackling the household debt crisis.

Furthermore, beginning June 2017, the central bank has relaxed Debt Clinic requirements, allowing unsecured NPL debtors broader access.

“Seven years since the implementation of the Debt Clinic, around 3.35% of all borrowers have successfully completed debt restructuring and exited the programme, with combined loans worth 288 million baht,” stated Ms. Nartnaree.

SAM predicts that around 55,000 unsecured loan customers classed as NPLs will participate in the Debt Clinic initiative this year.

Under the Debt Clinic requirements, the program accepts NPLs from credit cards, cash cards, and personal loans with debt default periods of more than 120 days.

It provides specific interest rate changes ranging from 3-5% each year, depending on the chosen debt instalment plan, with a maximum repayment length of 10 years. Furthermore, the Debt Clinic initiative is open to retail NPL borrowers aged 70 and up with total debt burdens of no more than 2 million baht.