Bangkok, July 21-BOT published measures to solve the problem of household debt sustainably starting next year, considered a turning point in adjusting the behavior of both creditors and debtors. Help solve existing debt problems, take care of new debts, and reduce Thai household debt to a sustainable level. But it takes time. relies on cooperation from all sectors and taking into account the all-around impact

Mr. Rondon Numnonda, Deputy Governor for Financial Institutions Stability, revealed that according to the Bank of Thailand (BOT) mentions "Sustainable Household Debt Solution" (Directional Paper) that from February 2023 reflects in-depth information on Thai household debt and how to solve debt problems that must be done comprehensively and legally. It takes time and requires cooperation from all sectors. It can be seen that since 2020, most BOT measures have focused on helping debtors affected by the COVID-19 epidemic. When the situation resolves, the BOT adjusts measures to focus on solving long-term debts in line with the problematic situation and the debtor's ability to repay debt.

However, the economy is gradually recovering clearly. As a result, the debtor's income began to improve. While the income of some groups of debtors is still slow to recover, the BOT has therefore issued measures that are appropriate to the economic situation in order to manage household debt in a more targeted and sustainable manner. It will raise the standard of credit lending business to debtors. since before debt going into debt during debt When debt is a problem And when selling / suing for debt, namely: 1. Bad debts can be solved. 2. Chronic debt To have an option to close the debt. 3. New debt to be quality, not become a problem in the future, and 4. informal debt. To have more opportunities to come to recover in the system The first measures to be enforced are responsible lending, including persistent debt management.

In this regard, the BOT has summarized the key points as follows: (1) Service providers must provide credit responsibly and fairly to debtors throughout the debt cycle, namely:

before/about to go into debt must advertise and offer to sell the product By providing complete, accurate and clear information without encouraging the debtor to go into overdebt.

• during debt Promote the provision of information, conditions and warnings that the debtor should know. To stimulate the debtor's behavior (nudge), including creating tools to help support debtors to have financial discipline, such as making an automatic system for debtors to pay more than the minimum. To help reduce the interest burden when debtors have trouble paying debts There must be guidelines for assistance that are appropriate to the ability to Debtor's payment and when prosecuting and transferring the debt Rights and important information must be informed to the debtor. debt mediation as well as the assignee of the debt must specify appropriate debt repayment conditions

(2) Service providers must take care of debtors who are in chronic debt. (Paying interest more than the principal in the past 5 years), which must help low-income and chronic debtors of revolving personal loans. The loan can be settled within 5 years with an interest rate of not more than 15 percent per year and there is enough money left over for living. And the credit history should be reported that the debtor has restructured the debt. This responsible lending measure will be effective from January 1, 2024, except for the part relating to chronic debt resolution. This will be effective from April 1, 2024, so that service providers have time to adjust the work system. and will be used gradually according to the level of income of the debtor which will be different for each service provider group

In addition, the BOT is also in the process of considering additional measures for household debt care, including testing a sandbox project in setting interest rates according to the risk of the debtor (risk-based pricing: RBP) and setting the debt service ratio (DSR). while the group of debtors with low risk or good repayment history There will be an opportunity to receive interest rates that are lower than the current interest ceiling. This will help foster a good credit culture. There will not be a general cancellation or increase in the current interest ceiling.

However, in the second quarter of 2024, the BOT will provide qualified service providers as specified. Take the personal loan test under supervision that is not a car registration loan as collateral and personal loans under supervision for 1-2 years. Service providers must propose a risk assessment system and interest distribution model for each group of debtors to the BOT for consideration before taking the test. and upon passing the test Service providers will then be able to grant credit under the new interest ceiling. The BOT will set criteria for exiting the sandbox project that can clearly measure success For service providers that fail the test will have to return to the original interest ceiling. All these processes will be carefully undertaken by the BOT to ensure that this mechanism will truly benefit the debtor.

For DSR measures, it is considered as part of the systematic risk management approach. (macroprudential policy) to take care of creating new debt Reduce over-indebtedness for the debtor to earn enough income after debt repayment to live This will initially apply to unsecured consumer loans (such as credit cards and supervised personal loans), which are the center of household debt problems first. to reduce the chance that some debtors may have to go out of the system. Initially, the BOT It plans to enforce this measure in 2025, reassessing the economic situation and context. which the enforcement of measures must be communicated in advance so that the public and service providers have time to adjust In addition to the implementation of the above mentioned household debt solutions Efficient and sustainable solution to household debt problems Requires cooperation from other sectors To extend the effect to household debt that is not under the supervision of the BOT as well, such as (1) instilling financial knowledge and discipline in debtors, (2) responsible lending for all types of creditors, (3) systematic debt counseling and mediation mechanisms, and (4) laying foundations for the country. Both the development of credit databases and alternative information used for evaluating and tracking debt. as well as generating income along with solving debt problems.-Thai News Agency For example, (1) cultivating debtors with financial knowledge and discipline, (2) responsible lending for all types of creditors, (3) systematic debt counseling and mediation mechanisms, and (4) laying the foundation for the country. Both the development of credit databases and alternative information used for evaluating and tracking debt. as well as generating income along with solving debt problems.-Thai News Agency For example, (1) cultivating debtors with financial knowledge and discipline, (2) responsible lending for all types of creditors, (3) systematic debt counseling and mediation mechanisms, and (4) laying the foundation for the country. Both the development of credit databases and alternative information used for evaluating and tracking debt. as well as generating income along with solving debt problems.-Thai News Agency

Source: Thai News Agency