BOT falls back on culture of saving
Worried about rising household debt, the Bank of Thailand is urging people to be more disciplined about saving money, while insisting that commercial banks remain strict with loan extensions.
BOT Governor Prasarn Trairatvorakul said the central bank would ramp up its efforts to get people to save money. It has also asked commercial banks not to stimulate overspending with their advertisements.
"Previously, we promoted the culture of saving before spending. Later, however, there was more promotion for people to spend. Now, we may again have to encourage people to save before spending and ask commercial banks not to aggravate the culture of not saving," Prasarn said.
According to the central bank’s monitoring, those whose monthly salary is more than Bt15,000 are not contributing too much to the problem of excessive household debt. Those earning below that figure, however, are seeing higher debt-to-income ratios.
"The BOT needs to promote saving and, basically, has to encourage people to work for higher income," Prasarn said.
Suchada Kirakul, adviser to the central bank, was less concerned than Prasarn about rising household debt, noting that the BOT monitors commercial banks’ credit extensions, which remain relatively disciplined in this regard.
On the Monetary Policy Committee’s decision to slash the policy rate by 25 basis points to 2.75 per cent at its October 17 meeting,
Suchada said lower borrowing costs helped relieve some people’s financial burden while commercial banks still took into consideration customers’ capability of handling their loans.
Overdue payments
Earlier, the BOT said in its October inflation report that it had begun to see more loan payments that were a month overdue in the previous six months.
If the economy slows, private enterprises also may find it more difficulty to service their loans, which could affect financial institutions’ loan quality in future, the central bank said.
Risks to households, according to the inflation report, included the global economic problems that could have increasing impact on the Thai economy and household income in the future.
The report said households ran into more difficulty making their loan payments as consumer lending accelerated, particularly automobile and other personal loans.
