Central bank to issue new rules to curb penalty on loan defaulters
The central bank will introduce new rules on the rate of penalty imposed on loan defaulters in a bid to ease borrowers’ burdens and motivate them to repay their debts, a Bank of Thailand (BOT) executive said on Tuesday.
Thanyanit Niyomkarn, assistant BOT governor, said the central bank will let financial institutions charge no more than 3 per cent on top of the contract rate stated in the loan contract.
For instance, if a bank offers personal loans at 20 per cent interest, and if the borrower fails to pay the instalment, then the bank can only impose a penalty of 3 per cent, resulting in total interest rate rising to 23 per cent.
Currently, the interest rate automatically rises to 25 per cent when a debtor misses an instalment.
This move to keep the penalty low should motivate debtors to honour their obligations as well as reduce their burden, she said.
The central bank plans to announce the new rule in the fourth quarter of this year, and will implement it in April next year. The new regulation will apply to personal, retail and business loans.
Financial institutions would also be required to offer borrowers the option of debt-restructuring first before the case is taken to court.
