BOT to End the Temporary Debt-Suspension Measure in Concern of Banks’ High Reserves

The Bank of Thailand (BOT) expected to end its temporary debt suspension measure on October 22 in concerns of the stability in the financial system  as the liquidity from debt repayment and interest income could be lost by 200 billion baht per year, while the extension could support debtors’ behaviour in a negative way regarding payment discipline.

 

Mrs. Roong Mallikamas, Assistant Governor, Financial Stability and Corporate Strategy Group, Bank of Thailand (BOT) addressed the debt suspension measure for small and medium-sized enterprises (SMEs) affected by Covid-19 pandemic which will end on 22 October 2020, the Bank has amended the financial assistance regulations to proactive assistance and more specific targets.

 

1. Small and medium-sized enterprises (SMEs) totaling 1.05 million accounts have registered for the loan payment holiday with an outstanding debt of 1.35 trillion baht. This figure is different from the 6.89 trillion-baht outstanding debt of SMEs and individual borrowers, which have been assisted by financial relief programs, such as debt payment deferment and reduction, interest rate reduction, and preemptive debt restructuring.

 

2. The BOT has been monitoring closely the financial impact of Covid-19 and does not expect any rapid cliff effect after the end of the temporary debt suspension due to the following factors.

 

1) Specialized Financial Institutions (SFIs) whose customers account for an outstanding loan of 400 billion baht, have already deferred payments for three to six months. Meanwhile, commercial banks with an outstanding loan of 950 billion baht have been closely monitoring their customers. Most of the customers indicated that they will be able to repay their debts when the loan payment holiday measure ends.

 

2)  Commercial banks will continue to assist their customers, who can not repay their debts or be unable to repay partial. Such assistance programs include individual debt restructuring to reduce the probability of loan deterioration, interest rate reduction for credit card and personal loans, debt payment deferment, debt consolidation, and multi-creditors debt restructuring program.

 

3) Only 6% of debtors with the total outstanding debt of 950 billion baht are cases whereas banks have not been able to get in touch or are in the process of contacting their customers.