BoT Adds SME Debt Readjustment Options
Ronadol: hope to contain the NPLs
The Bank of Thailand has added debt restructuring measures for entrepreneurs as the impact of the third wave of the pandemic worsens.
The central bank extended the duration of the moratorium on the debt of small and medium-sized enterprises (SMEs) until December from June 30.
The measure is available to SMEs suffering from the economic downturn following the third wave epidemic, including those that have gone out of business.
The extension of the debt moratorium is available to SME borrowers on a case-by-case basis, depending on the creditor’s consideration.
The central bank also allows financial institutions to use their own definition of SMEs when proposing debt restructuring. Former Bank of Thailand regulations limited financial assistance to SMEs with lines of credit not exceeding 100 million baht.
The central bank also relaxed the classification of non-performing loans (NPLs) for SME debt restructuring until December 31, said Deputy Governor for Financial Institution Stability Ronadol Numonda.
The move aims to contain bad debts in the banking system, as bad debts increase according to economic circumstances as SMEs continue to struggle.
In addition, Ronadol said the central bank maintains relaxed non-performing loan classifications and loan loss reserve rules for financial institutions, thereby helping SME debt restructuring.
The incentives are intended for financial institutions that offer additional financial assistance to SME clients other than the debt moratorium. Such additional financial assistance may include reducing principal and interest payments, lowering interest rates, and converting customer debt from short-term loans to long-term loans. However, these offers should be based on the debt repayment capacity and cash flow of the borrowers.
He said the central bank wanted debt restructuring measures to be implemented in accordance with the borrower’s ability to pay and business feasibility rather than focusing on the debt moratorium.
Reasonable debt restructuring is essential to help SMEs weather the crisis, Ronadol said.
As part of the central bank’s existing debt relief measures for businesses, which expire at the end of this month, the bank found that 65% of candidate SMEs are back on a debt repayment schedule. regular, while 30% remain in a debt restructuring program.
About 2% of the 30% still in a program are expected to resume paying on a debt schedule in June, although they are still struggling with the impact of the third wave, he said.
Some SMEs not eligible for existing debt relief measures continue to be affected by the third wave.
The central bank has adjusted and extended measures to allow SMEs to receive financial assistance, said senior director of Regulatory Policy Department 2, Suwannee Jatsadasak.
In related news, the Bank of Thailand allows financial institutions to pay interim dividends for 2021 not exceeding their dividend payout ratio in 2020, and not more than 50% of their net profit for the first half of 2021.
The central bank has also banned financial institutions from repurchasing shares.