BoT urges monitoring of debt servicing capacity

The Bank of Thailand requires financial institutions to monitor the debt service capacity of borrowers. (File photo from Bangkok Post)

The Bank of Thailand is asking financial institutions to monitor the debt service capacity of borrowers as the second phase debt relief measure expires this month, the president of GH Bank said.

Vulnerable groups, considered borrowers who have received a temporary suspension of debt repayment, will undergo a financial appraisal review by banks, said Chatchai Sirilai, chairman of GH Bank, a state-owned company.

In an attempt to help distressed businesses and retail borrowers, the central bank has defined four categories of relief measures, covering several types of policies such as lowering interest rates, deferral and reducing payment. debt, additional credit and debt restructuring.

There have been two phases of debt relief measures. The first started in April and the second in July. The aid program is due to end this month.

The total amount of debt under the central bank’s debt relief measures was 4.55 trillion baht, or 31% of the total outstanding debts in the banking sector, worth 14 trillion baht in June, according to data from the Bank of Thailand.

The prospect of an increase in bad loans is plausible as banks have “frozen” debt repayment, Chatchai said.

“By analogy, [banks] have at least 10 refrigerators to freeze debts. We will start unplugging each refrigerator one by one when a specific group of borrowers can exit the program, resolving the issue gradually, ”he said.

For GH Bank, the first batch of debtors in the first phase of the debt relief program had debts totaling 180 billion baht. Of this amount, debts of 100 billion baht continue to be covered by the debt relief program, while 80 billion are being settled.

Of the 80 billion baht, 9 billion is likely to turn into non-performing loans (NPL), because borrowers who support 5 billion have yet to repay.

The bank has set aside higher loan loss reserves to hedge against the rising outlook for NPL.

Of the reserve target of 5.3 billion baht, GH Bank set aside reserves worth 3.5 billion, with the remaining 1.8 billion to be gradually set aside, Mr. Chatchai.

The GH Bank has disbursed loans worth 156 billion baht as of September 30 of the 210 billion target. Further loan disbursements are expected this quarter, he said.

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