New measures spur Thai financial institutions to restructure debts

It will cut the amount of reserved provisions, but lower future interest income.

Debt consolidation will push Thai financial institutions and retail debtors to restructure as the possibility of normal loans becoming non-performing could be lessened, according to a UOB Kay Hian report.

The move will also subsequently reduce the amount of potential provisions to be set aside, but may lower banks’ future interest income from lower rates. Moreover, loans under the measures will be stage 1 loans and customers can apply for new loans from banks, analysts said.

Based on loan exposure, Siam Commercial Bank, TMB Bank, and Krung Thai Bank may see bigger impact due to their higher mortgage loan proportions. They have also granted auto hire purchase loans, credit card and personal loans to borrowers.

Retail borrowers can use collaterals in their mortgage loans to restructure their debt total and borrowers who register under the measure will be allowed to extend their debt payment period and also pay lower interest expenses, the report said.

In addition, lenders will cut interest rates on credit card and personal loans of up to 16% and 25% respectively to the minimum retail rate (MRR) of around 5.75-8.8%. The measure will begin on 1 September until 31 December 2021.