Thai household debt soars on credit cards, loans and auto loans

Bank of Thailand urged to review interest rate cap and oversee credit cards, personal loans and auto loans, as the Thai government has done is committed to tackling high household debt, incurred by credit card and personal loans.

The Bank of Thailand has been tasked with proposing measures to strengthen the competitiveness of local financial institutions in the long term.

Thai Prime Minister Prayut Chan-o-cha said on Tuesday that all relevant agencies, including the Bank of Thailand, have been ordered to speed up the handling of the debt burden among various groups of people.

“If people have high debt, especially at a young age, it will affect them for the rest of their lives,” the Prime Minister said.

According to General Prayut, the cabinet on Tuesday acknowledged the debt problem facing various groups of Thais, especially students, teachers, government officials, car and motorcycle leasing customers and those who have taken out loans. personal.

“Within six months, the relevant agencies are required to reduce the interest rate on personal loans, small microfinance and nanofinance debtors, teachers and cooperatives, as well as auto finance and motorcycle rental companies.” , did he declare.

He said the relevant agencies are also required to organize debt relief programs for student loans, personal loans, debts to specialized financial institutions (IFS) and cooperatives, and non-performing loans of small and medium enterprises.

Rate cap for credit cards, personal loans and auto loans

the central bank was tasked with reviewing the interest rate cap and overseeing credit cards, personal loans and vehicle title loans. The BoT should also supervise financial institutions to help reduce risks for their debtors, he said.

According to General Prayut, the government will propose measures to help financial institutions in the next phase to offer lower interest rates and to provide assistance measures to help young people and retirees in debt.

The government is also committed to creating a new agency to oversee car and motorcycle rental activities.

Thai household debt stood at 14 trillion baht in 2020, or 89.3% of gross domestic product (GDP).

According to central bank data in December 2020, the household debt burden resulted from credit cards and personal loans. The debt charge covering principal loans and interest on these two unsecured loan products represents 58% of total consumer loans.

The BoT estimated that the country’s household debt in the first quarter of 2021 increased by around 5% year-on-year. In the fourth quarter of 2020, Thai household debt increased 3.9% year on year.

Last Tuesday, Don Nakornthab, senior director of the BoT’s financial stability department, predicted a crossroads for the country’s household debt over the next four years, dropping to 92.8% of GDP or declining to 79.1% .

If Thai household debt increases by 1.2 times the average GDP growth over the past five years, the country’s household debt will rise to 18.1 trillion baht or 92.8% of GDP by 2025, from 14 trillion baht in 2020 or 89.3% of GDP, said Don. .

If household debt increases by 2% per year on average, Thai household debt will reach 15.4 trillion baht or 79.1% of GDP by 2025.

Source: Bank of Thailand, Bangkok Post

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