23-8-2023 (BANGKOK) The Bank of Thailand has confirmed that nearly 80% of credit cardholders have the capacity to meet their debt obligations by making the minimum payment of 10%, while the regulator is making preparations to assist those consumers who may struggle to comply with this rule.
The central bank’s assessment has revealed that there is a minority of credit cardholders who may face challenges in adhering to the minimum card payment requirements, especially when they return to the standard interest rates.
Suwannee Jatsadasak, the assistant governor for supervision at the central bank, stated that approximately 70-80% of credit cardholders can comfortably manage their debt by making monthly payments equivalent to 10% of their outstanding balances.
Currently, the central bank permits credit cardholders to make minimum monthly payments equal to 5% of their balances as part of its debt relief measures to assist consumers in coping with the economic impact of the pandemic. This rate is slated to increase to 8% in 2024 before reverting to the regular rate of 10% in 2025.
According to data from the central bank, specific timelines for the gradual increment of the minimum payment rate for credit card loans will be established. The central bank is also open to discussions with credit card issuers on this matter.
The regulator has formulated assistance measures to support credit cardholders who may find it challenging to comply with the regulation. The Bank of Thailand has introduced an option for credit cardholders who cannot meet the 8% minimum payment rate next year to transfer their debt to credit card loans with an annual interest rate capped at 16%.
Suwannee explained, “Previously, the central bank had planned to raise the minimum payment for credit cards to 8% this year but deferred the increase to the following year due to prevailing economic circumstances.”
The Bank of Thailand intends to work closely with credit card service providers to ensure they inform and educate cardholders about the impending increase in the minimum payment rate.
Suwannee emphasized that the central bank has no intention of raising the maximum interest rate for credit card loans, as doing so could impede consumers’ ability to repay their debts in the midst of an uneven economic recovery.
Before the pandemic, the maximum interest rate for credit cards was 18%, with a minimum payment rate of 10%.
In other news, the Bank of Thailand has reported a 0.4% decline in loan growth in the banking system during the second quarter year-on-year. This contraction marks the first decline in several years and is primarily attributed to loan repayments by government and large corporations.
Several major corporations have opted to raise funds through corporate bond issuances rather than traditional bank loans to manage funding costs amid the backdrop of rising interest rates.
