The government has announced plans to purchase non-performing loans (NPLs) with outstanding balances below 100,000 baht to alleviate financial burdens on small-scale debtors.
Deputy Prime Minister and Finance Minister Pichai Chunhavajira said the government is prioritising small-scale debt relief as the economic crisis is hitting mainly lower-income groups. The initiative aims to support 3.5 million individuals struggling with a total debt of 120 billion baht.
"Instead of using the national budget, funding will be sourced from the Financial Institutions Development Fund (FIDF). The government intends to acquire these NPLs from banks at just 1% of their value, restructuring them to provide more manageable repayment options," he said.
"The plan to buy NPLs at just 1% of their value is feasible, as banks have already written off these debts as losses and deducted them from taxable income at a 20% tax rate. Clearing these bad loans would also help banks clean up their financial statements. Some NPLs have reportedly been sold at prices below 1% in previous transactions," said the minister.
The decision to focus on debts below 100,000 baht is based on the fact this category represents the majority of debtors and can be helped at a relatively low cost.
These debts are mainly unsecured loans or consumer debts that have been overdue for over a year. This segment accounts for some 3.5 million people, or 65% of all NPL holders, with a total debt of 120 billion baht -- about 10% of all NPLs.
"Successfully addressing these debts could help reduce informal lending, lower household debt levels, and increase consumer purchasing power, ultimately aiding economic recovery," he said.
The minister said government spending on this initiative will be minimal. Funds will come from the unused budget of the "You Fight, We Help" debt relief initiative, which was allocated from the FIDF and still has around 20-30 billion baht available annually.
Mr Pichai said discussions with financial institutions will take place before proceeding with the purchases. If successful, the acquired debts will be managed by a dedicated debt management company, either an existing entity or a newly established one.
"The primary goal is to allow debtors to repay at cost price, with only administrative fees added, ensuring the government does not profit," said Mr Pichai.
However, repaying these debts will not immediately remove debtors from the National Credit Bureau (NCB) records. The government is exploring measures to expedite their removal while also providing alternative credit access.
The Government Savings Bank may offer loans of 10,000-20,000 baht, while virtual banks and private lenders that do not rely on NCB checks could also provide financial support. Though interest rates may be slightly higher than standard loans, they remain significantly lower than informal loans, which can reach up to 100% interest.
Addressing concerns the debt-buying initiative might encourage irresponsible borrowing, Mr Pichai said the government has weighed the pros and cons. He said the programme is designed to support those who can help stimulate the economy.