Debt relief initiative to have ‘marginal impact’ on non-bank lenders

Fitch Ratings says limited scope and existing offsets of measures would mitigate potential impact

 

Fitch Ratings has concluded that the Thai government's expanded debt-relief measures, aimed at assisting vulnerable retail borrowers and announced on February 11, will exert a negligible influence on the financial performance and credit profiles of non-bank financial institutions (NBFIs). 

 

The Friday statement concluded that the limited scope and existing offsets of the measures would effectively mitigate any potential impact.

 

The debt relief programme, initially unveiled in December 2024 to support clients of banks and their subsidiaries, now has been extended to encompass non-bank-owned NBFIs. 

 

As previously reported in Fitch Wire on December 19. 2024, the initiative has thus far garnered participation from Muangthai Capital Pcl (BB/A-(tha)/Stable) and AEON Thana Sinsap (Thailand) Pcl (A-(tha)/Stable), with further entrants anticipated.

 

Under the programme, NBFIs will receive subsidised funding via a soft loan from the state-owned Government Savings Bank (GSB) at an interest rate of 0.01%, contrasting with the deposit levy reduction provided to banks and their subsidiaries. 

 

However, the GSB loan is subject to a cap of 5 billion baht per lender and a total limit of 50 billion baht, thereby constraining the overall impact of the measures.

 

Fitch anticipates that the programme's eligibility criteria will limit client uptake among NBFIs, mirroring the experience observed with bank clients. Eligible borrowers must have been clients prior to 2024 and have fallen into delinquency by October 31, 2024. 

  

Furthermore, participating borrowers will be barred from obtaining new credit facilities for a period of 12 months. The government estimates that the measures will cover up to 50 billion baht in loans, representing less than 3% of total NBFI gross loans, although actual utilisation is expected to be lower.

 

The debt-relief scheme operates on an opt-in basis, allowing for interest-rate reductions of 10 percentage points. For instalment loans, monthly payments are reduced by 30% over three years, potentially including principal reductions. Revolving loans are converted into monthly instalments, with a minimum payment of 2% of the outstanding balance prior to enrolment.


The GSB subsidy will offset 90% of the interest-rate reduction, but will not cover costs associated with instalment reductions. Fitch believes that eligible debtors are likely already classified as Stage 2 or 3, with existing provisioning in place. 

Moreover, consumer finance companies typically offer some form of debt relief or restructuring to distressed clients, even absent this programme.

 

Fitch does not foresee any ratings implications arising from these measures. Fitch-rated standalone consumer finance companies are more likely to be affected by broader macroeconomic trends impacting asset quality and earnings.

 

The programme is seen as a response to broader regulatory concerns regarding Thailand's high household debt, which stood at 89% of GDP as of September 2024. Consumer finance companies remain vulnerable to potential future regulatory actions that could affect growth or performance.

(2025/03/01-00:00)