Debt Clinic, the scheme that pools unsecured bad loans of 16 local and foreign commercial banks with the aim of turning them into performing assets, has received a warm response from debtors.
Some 28,000 people applied to join the scheme in the four months to September, according to Thitima Rungkwansiriroj, chief of Sukhumvit Asset Management's (SAM), which manages the Debt Clinic.
Since it opened on June 1, through to September, around 28,000 loan defaulters applied to restructure their debts, averaging a loan principal of 230,000 baht owed to three banks per borrower, she said.
However, the number of participants for the programme is short of target so far because of requirements that allow only debts owed to banks and those borrowed by salary earners be restructured, said Mrs Thitima. The restrictions are being reconsidered to remedy this, she said, without revealing how many have been accepted or the target amount.
The clinic is aimed at income earners who failed to repay credit, cash card or personal loans with at least two banks for more than three months before May 1. The participants' principal plus unpaid interest must not exceed 2 million baht per borrower.
Participants of the programme will repay the debt only through SAM. Their restructured debt will carry interest rates of 4-7% for up to 10 years, depending on the monthly income of debtors. The rate, far below the central bank's ceiling of 18% for credit card loans and 28% for personal loan, will ease participants' financial burden.
The scheme is part of the Bank of Thailand's effort to reduce household debt, which clocks in at 80% of GDP. Pooling non-performing loans will allow commercial lenders to better address them by collecting comprehensive information on troubled debtors.
"With restrictions in qualifications and conditions, the number of the participants remains short of target. SAM, the Bank of Thailand and commercial banks are considering revising debtor qualifications to extend the service to self-employed workers and those whose cases are pending legal processes but are not undergoing bankruptcy to help more debtors access the programme," Mrs Thitima said.
Separately, she said SAM, the country's second-largest asset management company, had cumulative operating cash flow of 7.2 billion baht for the nine months to September, representing 78% of this year's target.
Its net profit for the January-to-September period amounted to 4.9 billion baht,
The bad-asset management firm, wholly owned by the Financial Institutions Development Fund (FIDF), has non-performing loans outstanding of 354 billion baht and non-performing assets of 23.3 billion.
As of September, SAM managed to contribute 4.4 billion baht to the FIDF, which uses the money to repay its debt. According to central bank data, the rescue fund's debt fell by 4.9% from the end of the 2015 fiscal year to 949 billion baht at the end-September last year.
In 2015, the FIDF forecast all its debt would be cleared in under 15 years, earlier than the 24 years previously scheduled.
