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    BOT Circular Introduces Changes to Reduce Bank NPLs

    October 29, 2020

    BOT issued a circular stipulating the rules on interest charge, default on debt repayment, and debt amortization. The objective of the circular is to help reduce the debt burden, create fairness in providing financial services to individuals, and reduce the incidence of non-performing debt in the financial system.

    Through this circular, BOT has introduced three important changes:

    • The default interest will be charged on the basis of "Actual default principal" only and does not include the principal portion of future installments that are not yet due.
    • Determination of interest rates for default on debt repayment by using the contractual interest rate plus not more than 3% per annum. This adjustment of the criteria will reduce the chance of default and it will also help to make the financial system more balanced.
    • Determination of the order of amortization by "Write down the longest outstanding installments first" so that the debtor knows the order of the amortization. This will help reduce the incidence of non-performing debt as well as help the debtor be encouraged to pay the debt continuously. 

    The announcement of determining the default interest rate calculation will take effect from April 01, 2021. The determination of amortization sequence will take effect from July 01, 2021. For the default on debt occurring before April 01, 2021, the financial service provider can apply the principles of the new announcement to consider the exemption or relaxation of defaulted interest to the debtor, as appropriate.


    Related Links (in Thai)

    Effective Date: April 01, 2021/July 01, 2021

    Keywords: Asia Pacific, Thailand, Banking, NPL, Debt Settlement, Credit Risk, Loan Repayment, BOT

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