Rising rates of interest increase mortgage NPLs, Bank of Thailand urges debt restructuring

In the first quarter of this 12 months, non-performing mortgage loans (NPLs) skilled a rise because of rising rates of interest, prompting the Bank of Thailand (BoT) to encourage banks to assist debtors via debt restructuring.
The central bank recently revealed a housing loan NPL ratio of three.16% in the business banking system, up from three.01% in the earlier quarter. The primary cause for this improve is the rise in rates of interest, based on Suwannee Jatsadasak, assistant governor at the BoT.
While banks typically keep a buffer to handle increased credit danger from mortgage loans throughout interest rate hikes, this cushion may be insufficient for some debtors. Consequently, the central financial institution mandates that banks employ pre-emptive measures to support borrowers with debt restructuring. Suwannee said…
“The central financial institution has prolonged long-term debt restructuring measures until the tip of this yr, offering the opportunity for banks to assist customers in easing their financial burden and controlling NPLs.”
Despite this, she noted that the overall banking system’s NPLs skilled a slight decline in the first quarter of this yr, each in phrases of amount and ratio. Bonanza is attributed to loan portfolio management by way of ongoing debt restructuring, write-offs, and sales in each corporate and retail loans.
At the end of March this 12 months, the banking industry’s gross NPLs were valued at 498 billion baht, corresponding to an NPL ratio of two.68%, down from 2.77% in the same quarter of 2022.
With GDP progress and NPL containment, the nation’s household debt-to-GDP within the fourth quarter of 2022 stood at 86.9%, a lower from the earlier quarter. However, the household debt ratio stays high, and the BoT anticipates a gradual decline by way of complete debt restructuring measures in collaboration with the central financial institution and other related businesses.
Financial institutions’ special point out loans (SM) also experienced a slight improve within the first quarter of this yr, remaining at roughly 660 billion baht. If monetary institutions can control SMs through long-term debt restructuring measures, the banking sector’s NPLs could additionally be managed.
The modest enhance in SMs and NPLs is small compared to the significant rise in NPLs during the pandemic. Furthermore, NPLs within the banking sector have already reached their peak, but both the BoT and monetary institutions should proceed to monitor the situation and make use of pre-emptive measures when negative indicators emerge, based on Suwannee.
She added that the number of debtors affected by the pandemic and participating in financial institutions’ debt assistance programmes has been decreasing. However, susceptible segments, such as non-bank customers, nonetheless require help..

Leave a Comment