Capacity to repay to normalise by 2024

Capacity to repay to normalise by 2024

People maintain social distancing while waiting to access financial services at a branch of Government Savings Bank at a shopping mall. Varuth Hirunyatheb

The debt repayment capacity of retail customers at Government Savings Bank (GSB) will gradually return to normal levels in three years once the pandemic is controlled, said bank president Vitai Ratanakorn.

If outbreaks improve this year, the country’s economy will begin to recover from 2022, he said.

This recovery process should gradually restore the debt repayment abilities of GSB’s retail customers to normal levels within 2-3 years.

Mr Vitai said small and medium-sized enterprises as well as rural folk have suffered the most from the prolonged pandemic’s impact. The outbreak slammed the service sector, which employs 40-50% of total labour in the country, he said.

The service sector depends on international tourist arrivals, which tallied 40 million in 2019. The figure plunged after the first outbreak started in April last year.

Last week, the Economic Intelligence Center (EIC), the research house of Siam Commercial Bank, downgraded its forecast for foreign tourist arrivals this year from 300,000 to 170,000. However, the EIC expects tourist arrivals to increase to 6.3 million in 2022 thanks to the improvement in infections locally and internationally, as well as a low base effect.

Since the outbreak, the bank has continued to provide financial assistance to customers, most of whom are retail borrowers, to help with the impact of the pandemic.

Mr Vitai said GSB’s non-performing loans (NPLs) are at a manageable level of 2.5% of its outstanding loans.

He believes the bank’s NPLs will not rise beyond 3.5% of outstanding loans, though some accounts might become NPLs after the expiration of the bank’s debt relief measures at the end of this year.

Mr Vitai said that if NPLs do reach 3.5% of the loan portfolio, this is still considered a manageable level.

GSB recently suspended plans to take legal action against 40,000 customers who became NPLs prior to Aug 1 this year.

The suspension began on Sept 2 and lasts until Dec 31.

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