Govt keen to dangle debt relief

Former prime minister Thaksin Shinawatra’s recent idea to solve the problem of non-performing loans (NPLs) in the household debt sector is just a further extension of two similar programmes introduced by a previous Pheu Thai-led government to ease the financial burden of small debtors and SMEs.

- Veera Prateepchaikul

The first programme tackles informal debt introduced by the previous prime minister Srettha Thavisin using “carrot and stick” measures on informal creditors. About 146,000 debtors with total informal debt amounting to about 10 billion baht registered to join, and the Interior Ministry managed to settle debts for about 16,000, or roughly 10% of the total.

The second is the Khun Soo, Rao Chuai (“You Fight, We Help”), jointly implemented by the Bank of Thailand, the Thai Bankers Association, the Finance Ministry, the National Economic and Social Development Council, other financial institutions and non banks to assist small debtors and SMEs by extending their repayment period and affording them with an option of interest payment suspensions for three years if they fulfil their obligations.

However, Thaksin’s “think aloud” idea is to buy all the household debt back from commercial banks and have the debtors settle through re-financing. At this point, it remains unclear whether the government needs to purchase the debt first or if asset management companies in the private sector will assume the role. Former PM Thaksin told voters during his speech at a local administration election campaign in Phitsanulok that the government would not have to spend a dime.

In addition, he said debtors can have their names removed from the list kept by the Credit Bureau. This would be a heaven-sent gift for debtors, but there is doubt whether the promise is the real deal or will turn out to be a tale of “building idiomatic castles in the sky”.