GH Bank to launch debt rejig scheme

State-owned GH Bank plans to introduce a new debt restructuring scheme, including a penalty interest haircut and interest payment deferrals, in April to help turn around bad loans.

Some 20,000 loan defaulters with combined non-performing loans (NPLs) of 20 billion baht are expected to benefit from the debt restructuring scheme, said GH Bank president Chatchai Sirilai.

Only low-income earners who intend to restructure debt are eligible for the scheme, he said.

The bank will claw back loan principal while providing debt forgiveness from penalty interest rates to the scheme’s participants.

For payments of new interest for a specific period incurred after debtors enter into the restructuring process, they will be deferred to the final years of the contracts to bump principal payment up as a means to prevent these debtors from losing their homes, Mr Chatchai said.

GH Bank has NPLs worth about 50 billion baht, representing 4.05% of its loans outstanding.

In 2019, the state-backed mortgage lender’s NPLs stood at 4.3%.

The prospective debt restructuring scheme is in accordance with the bank’s mission to help people own their own homes, while profit is not its main target, Mr Chatchai said.

The bank’s previous debt restructuring scheme required debtors to pay both principal and interest in full, he said, and this caused them to become re-entry NPLs because the penalty interest rate is quite high at 13.5%.

The new scheme is subject to the consent of the bank’s board and that of the Bank of Thailand.

To prevent moral hazard, GH Bank will set clear-cut qualifications, including borrowing amount and payment history, for those eligible to join the scheme, Mr Chatchai said.

The debt restructuring scheme is a tool to help GH Bank reduce NPLs. The bank aims to lower NPLs to 3.8% by year-end and divest of bad loans worth 5 billion baht.