Latest debt relief will cost banks Bt10bn per year: research
The central bank’s latest debt-relief measure will cost banks Bt10 billion a year, Kasikorn Research Centre said on Friday.
On Thursday, the Bank of Thailand announced a debt consolidation measure to allow borrowers to bundle their credit card, personal and mortgage loans into one sum. Borrowers can then utilise collateral in their mortgage loans to restructure their debt total with financial institutions. This will cut their interest on personal loans from the usual 16-25 per cent to the minimum retail rate (MRR) of 5.75 to 8.8 per cent, said the central bank. Borrowers will be also allowed to extend their debt payment period.
“The debt relief will greatly benefit retail borrowers, but is expected to reduce banks’ income from interest by 1.67 per cent annually,” said Thanyalak Vacharachaisurapol, deputy managing director at Kasikorn Research.
For the rest of this year, bank revenue from interest payments is expected to drop by 0.56 per cent, she added.
Annual revenue from loan interest in the banking sector totals around Bt700 billion.
Thanyalak said banks will get some benefit from the debt consolidation as it may enable them to reduce their reserves-against-risk assets.
Meanwhile, Kittipat Chonwut, CEO of personal loans company J Fintech, said he supports the central bank’s measure and will advise J Fintech borrowers to refinance their debts with banks. But banks would first have to accept their requests, he cautioned.
J Fintech has loaned money to about 8,000 people affected by the Covid-19 fallout. The company also joined a previous central bank scheme designed to help borrowers restructure their debts. Kittipat said only 100-200 J Fintech borrowers were asking for more support and their combined debt was not large.
