Bank of Thailand considers interest rate cuts to address household debt

[webfact]

 

A senior executive at the Bank of Thailand hinted at the possibility of interest rate slashes, which could provide a lifeline to struggling debtors, desperate to escape from their worsening debt cycles. In talks with the Thai Bankers’ Association (TBA) and other related groups, the central bank is exploring various methods to curb the nation’s escalating household debt.

 

According to the central bank’s deputy governor, Ronadol Numnonda, such cuts could provide a reprieve for burdened borrowers who have been shouldering persistent debts for a considerable period. He revealed that this month, the regulator plans to introduce three initiatives focused on responsible lending, risk-based pricing, and macroprudential policy, aimed at resolving the nation’s troublesome household debt situation. Following this, Ronadol announced, the central bank would hold a public hearing on these three proposals.

 

While discussing the proposed rate reductions, TBA chairperson, Payong Srivanich, noted that all stakeholders should consider the potential repercussions, as it could result in a moral hazard. He suggested a thorough examination of responsible lending by financial bodies, the provision of equal and fair access to finances, and an analysis of borrowers’ debt repayment capabilities as possible countermeasures to the household debt issue.

 

by Alex Morgan

Image courtesy of Bangkok Post

 

#news

Full story: https://thethaiger.com/news/business/bank-of-thailand-considers-interest-rate-cuts-to-address-household-debt

 

-- © Copyright Thaiger 2023-07-06

 

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[ikke1959]

It is just common in Thailand that you borrow and don't pay back. You see it everywhere and the reason is easy... Thai people are learnt to spend, go on holidays ( even extra holidays are added), wear every day new outfits, and be beautiful with all kind of cosmetics. If you don't do it it seems you are poor and you will loose face.. so borrow from who has money and don't pay back but live like a God... No wonder so many households are in debt. Start to teach how to use money and save before buying or holiday, instead of thinking that today is the last day of your life...

[petermik]

So that`s why the Baht is falling today.....

[Enzian]

8 minutes ago, petermik said:

So that`s why the Baht is falling today.....

Yep, we presume that a currency will gain strength with higher rates, and vice versa. But this is just one out of a set of proposals only.

I'd like to follow this topic because my tgf has a loan on farmland with some kind of government bank set up to provide liquidity to farmers--I don't know the official name, should find out, though I've met a branch manager. The rate on her loan is currently 9.75%. She recently had to sign a new contract because she went through a period of non-performance and the principal rose (but they didn't try to foreclose on the security). This is probably too much personal information for a public forum, but if anyone has insights on these situations I'd appreciate comments. Thanks.

[stoner]

or stop loaning money to people who can't pay it back. 

 

what moral hazard ? 

[Bday Prang]

9 minutes ago, stoner said:

or stop loaning money to people who can't pay it back. 

 

what moral hazard ? 

"Neither a lender nor a borrower be" the best advice of all 

[Bday Prang]

38 minutes ago, Enzian said:

Yep, we presume that a currency will gain strength with higher rates, and vice versa. But this is just one out of a set of proposals only.

I'd like to follow this topic because my tgf has a loan on farmland with some kind of government bank set up to provide liquidity to farmers--I don't know the official name, should find out, though I've met a branch manager. The rate on her loan is currently 9.75%. She recently had to sign a new contract because she went through a period of non-performance and the principal rose (but they didn't try to foreclose on the security). This is probably too much personal information for a public forum, but if anyone has insights on these situations I'd appreciate comments. Thanks.

So you met a bank manager of a bank were your GF has a loan, but do not know the name of the bank he worked for ?!!    In what way is this "too much information" ? 

[Guderian]

4 hours ago, webfact said:

A senior executive at the Bank of Thailand hinted at the possibility of interest rate slashes,

Great idea, in no time at all we'll be back to sane exchange rates like 40 THB/USD and 55 THB/GBP.

[hotchilli]

4 hours ago, webfact said:

the central bank is exploring various methods to curb the nation’s escalating household debt.

Responsible lending?

[Bday Prang]

26 minutes ago, Guderian said:

Great idea, in no time at all we'll be back to sane exchange rates like 40 THB/USD and 55 THB/GBP.

I'm all for that but some on here will find a reason to whinge, they just can't help themselves

[Scouse123]

Well they can't cut savings rates any more, can they!....????

[Jumbo1968]

Just bought a car, cash, whilst looking for one every advert included finance whilst apparently cheap monthly repayments the interest rate was phenomenal. 
Looking at the cars history it looked like it had been a repossession from the previous owner by the bank.

[worgeordie]

@ 1.75 % , how are they going to SLASH the rate .... it's already

one of the lowest in the World ,and why are they always trying

to help people who cannot /won't manage their finances ,(not

only Thailand) while those that are canny with their money and

save a few bob , only to see it melt away with inflation .

 

regards Worgeordie

[The Theory]

58 minutes ago, Guderian said:

40 THB/USD

probably that is the real rate right now imo.  

[The Theory]

4 minutes ago, worgeordie said:

and why are they always trying

to help people who cannot /won't manage their finances

To motivate them "not stopping" their payments. Lower rate better than 0 payments for banks. Banks are dealing with many people in the same situation. 

[Cake Monster]

A move such as this would surely accelerate the rate of which Foreign money is leaving the Country,

The BOT should be raising interest rates to slow down the amount of borrowing and to address the Inflationary pressures

If the people were lent money they have to pay it back, and if the Banks are so lax at lending to suitable borrowers then really they should not be in the Banking Business at all

Was it not in 1997 that the Banks here were lending money at poor asset borroweres ?

Look what happened then

[worgeordie]

12 minutes ago, The Theory said:

To motivate them "not stopping" their payments. Lower rate better than 0 payments for banks. Banks are dealing with many people in the same situation. 

It's the banks that most likely got them into debt in the first place ,I think it's going to take more

than lower rates to motivate them , lower rates are what got them into trouble .

 

It's a I must have it and I want it now society ,not just here ,around the World .everywhere in the World

Governments are putting rates up , Thailand wants to be the only one to reduce rates.

 

regards Worgeordie

[Purdey]

This idea of lowering interest is really aimed at helping banks out of a predicament they created. Even at zero percent interest it is doubtful many poor borrowers can or want to pay back what they owe.

 

This is a banking problem, not a tax payer problem. Banks can say no to loan requests but they can't say later they didn't know the borrower would default based on their own risk assessment.

 

Whatever happened to the mantra that to contain inflation, the central bank should raise interest?

[The Theory]

1 hour ago, worgeordie said:

Thailand wants to be the only one to reduce rates.

I'm not sure if this is for all rates, my guess is for cards only and not all card holders become qualify for that. 
 

Edited July 6, 2023 by The Theory

[zzaa09]

4 hours ago, hotchilli said:

Responsible lending?

That.....as well as responsible lendees. 

Both might be considered enigmas. 

[billd766]

6 hours ago, Guderian said:

Great idea, in no time at all we'll be back to sane exchange rates like 40 THB/USD and 55 THB/GBP.

I do hope so for my and my families' sake.

[Enzian]

5 hours ago, worgeordie said:

Thailand wants to be the only one to reduce rates.

Even Erdogan seems to have given up on his crazy theory about how low rates can control inflation--after nearly ruining the country. We have to remember that this OP is about proposals; I honestly believe that they are not THIS crazy, but kind of hope I'm wrong for various reasons.

[kickstart]

8 hours ago, Enzian said:

Yep, we presume that a currency will gain strength with higher rates, and vice versa. But this is just one out of a set of proposals only.

I'd like to follow this topic because my tgf has a loan on farmland with some kind of government bank set up to provide liquidity to farmers--I don't know the official name, should find out, though I've met a branch manager. The rate on her loan is currently 9.75%. She recently had to sign a new contract because she went through a period of non-performance and the principal rose (but they didn't try to foreclose on the security). This is probably too much personal information for a public forum, but if anyone has insights on these situations I'd appreciate comments. Thanks.

The bank will be BAAC,The Bank of Agriculture and Agriculture Co-ops ,Tor-Gor-Sor in Thai ,they basicity loan farmers money, some time on short time  Ie money to buy seed and fertilizer then pay it back after the harvest is sold.

Other loans would be long term ,ie to buy land, equipment .

I live in a big dairy cow area, I know farmers that have up to500 000 baht some plus loans, money to buy stock build cattle buildings ect

It is the sugar cane farmers with the biggest debt, since the ban on burning cane, in some areas, a lot of large cane farmers have brought cand harvesters costing 2millon plus baht, secondhand imports, wife knows a cane farmer wo has a 1-million-baht loan.

I read somewhere a while ago with compound interest it would take Thai farmers 50 years to pay back all of their loans, as BAAC is a government bank, they try not and foreclose loans. 

[Toolong]

'Macroprudential policy'.....?

 

Me: "Listen dear, I think we need to be more careful about our macroprudential policy."

 

Wife: "So you wanna buy it or not?"

 

Me: "Well......, yeah.....but....."

[jacko45k]

19 hours ago, petermik said:

So that`s why the Baht is falling today.....

Yes might be.... also concern that the politics will or will not sort itself out. Concern we might just end up with many of the  the same old sour faces back, despite what the election results seemed to mandate!

[huangnon]

17 hours ago, Jumbo1968 said:

Just bought a car, cash, whilst looking for one every advert included finance whilst apparently cheap monthly repayments the interest rate was phenomenal. 
Looking at the cars history it looked like it had been a repossession from the previous owner by the bank.

Cars, houses, land.. The banks are lending out money they don't really have at extortionate interest rates, and scooping up real assets (wealth) in return.

[HaoleBoy]

19 hours ago, stoner said:

or stop loaning money to people who can't pay it back. 

 

what moral hazard ? 

These loans are called "predator" loans.   Done all over the world ... get the poor to take out loans they can't afford.

[stoner]

6 minutes ago, HaoleBoy said:

These loans are called "predator" loans.   Done all over the world ... get the poor to take out loans they can't afford.

are there not laws in place though ? you can say no to a predator loan. they put business cards on my driveway almost every day. 

 

the situation shouldn't get to the point of the poor needing loans...... but we live in a predator world. 

[jacko45k]

10 minutes ago, HaoleBoy said:

These loans are called "predator" loans.   Done all over the world ... get the poor to take out loans they can't afford.

Although here, I suspect many are taken up with a limited determination to maintain the payments. 

[h90]

19 hours ago, stoner said:

or stop loaning money to people who can't pay it back. 

 

what moral hazard ? 

The solution for the government is not to help either banks nor people.

If a big bank goes bankrupt, the other banks will learn it. If twice someone loose the car which is already 60% paid up, he'll learn it.....