Lending guidelines planned to reduce Thailand’s household debt

 

 

Thailand’s commercial banks have recently agreed, in principle, with the Bank of Thailand to set lending guidelines by limiting a borrower’s debt-to-service ratio (DSR) to 70%, for those earning up to Bt30,000 per month, in an effort to fix expanding household debt, which is regarded as risk to overall financial stability.

 

The guidance detail has not yet been finalized, pending further discussions between the Bank of Thailand and commercial banks. At present, each bank determines its own DSR limit. If the DSR is capped at 70%, a person with Bt10,000 monthly income must not have a debt obligation greater than Bt7,000 per month.

 

Commercial banks have recently agreed, in principle, to the DSR limit, even though some banks expressed off the record concerns that the tighter loan approval requirements may mean some borrowers turn to loan sharks.

 

Full story: https://www.thaipbsworld.com/lending-guidelines-planned-to-reduce-thailands-household-debt/

 

 

-- © Copyright Thai PBS 2019-08-26

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70% debt to income ratios!?  And that is after tightening the lending requirements?  That certainly doesn’t leave much left for necessities.  And to think that most mortgages are adjustable rate too. So...as a persons income goes up (hopefully...maybe), his mortgage payment goes right up with it (guaranteed).

The horse has already bolted; this new gate is too late.

3 hours ago, webfact said:

Commercial banks have recently agreed, in principle, to the DSR limit, even though some banks expressed off the record concerns that the tighter loan approval requirements may mean some borrowers turn to loan sharks.

The banks are the real sharks the so called loan sharks are just the bottom feeders.

I guess those with a DSR of 3,500% continue to be serviced by banks in a "more equal" lending guideline as outlined in the PM's favorite read Animal Farm.

example:

Quote

Natee Ratchakitprakan, Bhumjai Thai party-list MP and wife of Tourism and Sports Minister Phiphat Ratchakitprakan. She informed the NACC that she has Bt4.674 billion in assets broken down as Bt71.597 million of her own assets and Bt4.6 billion in assets belonging to her husband. The two have debts of Bt177 billion.

however, it is also probable that the financial reporting is suffering from the usual typos and misunderstandings...

and that's why individual interpretation of any rule/law/guideline by a "competent officer" is the only way, the Thai way.

 

Lot of thai peoples in the villages borrow under the name of sister, brother, friend....

Because they don't have a real salary, they can't borrow by themselves.

 

And when there is a problem they borrow from a loan shark to give money back to sister, brother, friends,...

 

1 hour ago, legend49 said:

The horse has already bolted; this new gate is too late.

For every gate that is closed a new one opens. This time for loans to motorbike taxi drivers to buy and own the best new bike on the Soi corner.

 

 

The problem is that most Thais, due to a woefully unequal society and a lack of opportunity, are simply totally unsuitable borrowers in the first place and have little or no chance of freeing themselves from a predatory loan ... lucky if they can service the interest each month. Also, this common attitude that prevails now that people have regarding their entitlement to have all the luxuries right now and that there is no need save for things. DSR rate of 70% is some sort of deluded joke. I guess though the farmers would be out waving their pitchforks if they didn't get their frequent scraps/government placation stipends as many families are probably so far into debt it's silly. I don't think there is much that can be done about this issue short of massive debt cancellation and it'll only get worse.

4 hours ago, webfact said:

Lending guidelines planned to reduce Thailand’s household debt

It will only increase the predatory loan shark financing.

In turn the borrowers (typically farmers) will complain to the government who has for at least the last five years bailed out the borrowers from loan shark lenders with new government sponsored soft loans.

Borrowers pay off the shark lenders, default on their subsidized government loans, and return to the shark lender for more financing.

It's an income inequality trap cycle - not a sustaining solution.

Well we all see how much notice many Thais take of laws and rules, what chance does a "guideline" have?

Some of the biggest loan sharks are the banks themselves.... on mortgages for home buyers.

A friend of mine has just moved into a town house, Cost 1.25 million baht repayable over 30 years.

When she told me the monthly repayment I thought it sounded odd.

Did the maths and said Wow... after 30 years the end figure repaid works out at 144%

Good return for the bank !!!!

50 minutes ago, hotchilli said:

Some of the biggest loan sharks are the banks themselves.... on mortgages for home buyers.

A friend of mine has just moved into a town house, Cost 1.25 million baht repayable over 30 years.

When she told me the monthly repayment I thought it sounded odd.

Did the maths and said Wow... after 30 years the end figure repaid works out at 144%

Good return for the bank !!!!

Thats usual for any bank.  Did you check your figures against inflation during the same period?

Here it is in plain simple and undeniable. Household debt in Thailand will never decrease. Thais have no concept of common sense when it comes to handling money. If they got it they spent it, if they haven't got it they just borrow from a Bank or loan shark.

Sent from my CMR-AL19 using Thailand Forum - Thaivisa mobile app

Think the banks are going to run into trouble against the government trying to get consumers to get the country out of the economic crisis by getting more loans from the banks !!!

5 hours ago, klauskunkel said:

I guess those with a DSR of 3,500% continue to be serviced by banks in a "more equal" lending guideline as outlined in the PM's favorite read Animal Farm.

example:

 

Quote

 

Quote

Natee Ratchakitprakan, Bhumjai Thai party-list MP and wife of Tourism and Sports Minister Phiphat Ratchakitprakan. She informed the NACC that she has Bt4.674 billion in assets broken down as Bt71.597 million of her own assets and Bt4.6 billion in assets belonging to her husband. The two have debts of Bt177 billion.

 

however, it is also probable that the financial reporting is suffering from the usual typos and misunderstandings...

and that's why individual interpretation of any rule/law/guideline by a "competent officer" is the only way, the Thai way.

There is a very big difference between "productive" debt and "consumer" debt. Borrowing money to purchase a building that generates rent revenues that cover the loan payments is very different from borrowing money to purchase a television that generates no money. Debts of Bt177 billion are more likely to be investments, although there is still the question of how good those investments are.

2 hours ago, Jimbo2014 said:

Thats usual for any bank.  Did you check your figures against inflation during the same period?

No... this was about a year ago.

Not my house or mortgage so I wasn't bothered.

I just thought the monthly repayments sounded iffy... did a quick calculation and said to her did she realise the total repayment figure at that time as 144%

she just looked blank and said that's what the bank gave me.... she didn't even do the figures herself !

I wonder how many others are the same... don't even know how much they are giving the banks !

The average Isaan family has debt.  But maybe that’s not all bad.  It also encourages the attractive young ladies to seek foreign husbands. Win/win.

5 hours ago, carabaothai said:

Lot of thai peoples in the villages borrow under the name of sister, brother, friend....

Because they don't have a real salary, they can't borrow by themselves.

 

And when there is a problem they borrow from a loan shark to give money back to sister, brother, friends,...

The standard MO is to never pay anything back. Which naturally means one should never lend anything to Thais.

5 hours ago, hotchilli said:

No... this was about a year ago.

Not my house or mortgage so I wasn't bothered.

I just thought the monthly repayments sounded iffy... did a quick calculation and said to her did she realise the total repayment figure at that time as 144%

she just looked blank and said that's what the bank gave me.... she didn't even do the figures herself !

I wonder how many others are the same... don't even know how much they are giving the banks !

You can see the impact of interest at the link below.  At 5% interest for 30 years you will pay close to double your loan value (200%) - interest accounting for the doubling.  If you deduct inflation then its costing you 3% per year to loan money.  Adds up over time:  https://investinganswers.com/calculators/loan/loan-interest-calculator-how-much-interest-will-i-pay-my-lender

8 hours ago, hotchilli said:

No... this was about a year ago.

Not my house or mortgage so I wasn't bothered.

I just thought the monthly repayments sounded iffy... did a quick calculation and said to her did she realise the total repayment figure at that time as 144%

she just looked blank and said that's what the bank gave me.... she didn't even do the figures herself !

I wonder how many others are the same... don't even know how much they are giving the banks !

Did you never do the calculation on your own (home country) mortgage?

Thais translate borrowing as giving, don't expect it to ever be returned in full and they do this multiple times. The majority have no idea how to handle money or finances, they think they know everything and time shows they know nothing, sweep it under the carpet and forget it ever happened. This is another example of the failure of education.

13 hours ago, Brigand said:

The problem is that most Thais, due to a woefully unequal society and a lack of opportunity, are simply totally unsuitable borrowers in the first place and have little or no chance of freeing themselves from a predatory loan ... lucky if they can service the interest each month. Also, this common attitude that prevails now that people have regarding their entitlement to have all the luxuries right now and that there is no need save for things. DSR rate of 70% is some sort of deluded joke. I guess though the farmers would be out waving their pitchforks if they didn't get their frequent scraps/government placation stipends as many families are probably so far into debt it's silly. I don't think there is much that can be done about this issue short of massive debt cancellation and it'll only get worse.

And it’s not in the culture to repay loans