BANGKOK (NNT) – The Bank of Thailand (BoT) has added measures for retail loan restructuring, as part of its third phase of debt relief for individual borrowers, aiming to ease hardships caused by the COVID-19 pandemic.

According to BoT deputy governor Ronadol Numnonda, the new measures, implemented on 4 May, will allow vehicle hire-purchase loans and car title loan borrowers, including motorcycle owners, to return their vehicles to creditors if they cannot repay debt because of the outbreak.

If a vehicle is returned and borrowers still owe a balance, the central bank asked financial institutions to help restructure the remaining debt on a case-by-case basis. The financial institutions include commercial banks, specialized financial institutions and non-bank companies.

The measures also offer additional options for longer loan extensions and lower interest rates than the second phase. For mortgage borrowers, the central bank allows repayment on a “step-up” basis, which is a new measure for the third phase.

Thai economy is projected to recover to its pre-COVID-19 level in the third quarter of 2022

Since early 2020, the Thai economy has faced a number of challenges from the COVID-19 pandemic. Notwithstanding early signs of recovery in some sectors, overall economic recovery is expected to be gradual: the Thai economy is projected to recover to its pre-COVID-19 level in the third quarter of 2022.

Moreover, the recovery is likely to be uneven, especially for SMEs with limited access to capital, as well as businesses that are hard-hit by the pandemic.

Tourism sector will take 4-5 years to recover to pre-COVID-19 level

The tourism sector, which employs more than 10 million jobs, will take 4-5 years for the number of tourists to recover to pre-COVID-19 level. The prolonged and increased level of uncertainties further impaired financial access of affected businesses.  Those with outstanding debts also find it more difficult to negotiate debt restructuring in the absence of future income and cash flow projections.

Under such circumstances, the existing short-term relief measure through the Emergency Decree on the Provision of Financial Assistance for Entrepreneurs Affected by the COVID-19 Pandemic B.E. 2563 (Soft Loan Emergency Decree), enacted on 19 April 2020, is insufficient to handle the prolonged nature of the situation.

The proposed measures provide 350 billion baht support to businesses

To address this, the Bank of Thailand (BOT) and the Ministry of Finance (MOF) recognized the immediate need for additional financial measures, and the Cabinet today approved the proposed measures totaling 350 billion baht, with two-year loan withdrawal period and a possible one-year extension.

The Financial Rehabilitation measures’ primary objective is to support viable businesses so that they can remain open, maintain employment, and have opportunities to recover and transform themselves for the post-COVID-19 world.

The measures are designed with three underlying principles: appropriate under the current heightened risk outlook, flexible enough to withstand the rapidly-changing environment, and inclusive so that different needs in different sectors are addressed. Public agencies, financial institutions, as well as private sector representatives such as the Thai Chamber of Commerce, the Board of Trade of Thailand, and The Federation of Thai Industries have worked closely together in the designing the features to ensure that they adequately address business needs under the current context. The measures include:

1.  Soft loan facility for businesses (totaling 250 billion baht) to support viable small and medium enterprises (SMEs) affected by the COVID-19 crisis.

This measure aims to address limitations of the previous soft loan measure by expanding the pool of eligible borrowers to include both new and existing borrowers; expanding credit limit; expanding loan tenor; and amending the interest rates to better support business recovery. Furthermore, the loan facility will be supported by a credit guarantee scheme through the Thai Credit Guarantee Corporation (TCG) and receive additional exemptions or reductions on relevant taxes and fees. As a part of the loan facility, the BOT will provide funding for financial institutions at low funding rate to channel liquidity to businesses in need.   

2.  Debt restructuring through Asset Warehousing with Buy-Back options (totaling 100 billion baht) provides standardized debt restructuring program for adversely affected borrowers whose businesses require prolonged recovery period, while possessing viable business models and collaterals.

Under the program, businesses have the first rights to repurchase their collaterals at the agreed transferred price plus an additional carry cost at 1 percent per annum as well as incurred asset maintenance costs and other relevant fees. Businesses whose assets have been transferred may lease their assets from financial institutions to continue business operations; and the rents received by financial institutions will be deducted from the amounts to be repurchased by the businesses at a later date. Such scheme would shield businesses from having to sell collaterals at fire-sale price and provide opportunity to continue their business through the recovery.

The BOT will support the program by providing low-cost funding to financial institutions equivalent to the asset-transferred price agreed upon by financial institutions and borrowers. At the same time, relevant public agencies will provide exemptions or reductions on taxes or relevant fees such as those levied on asset transfers during initial transfers and repurchases by original owners. 

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