Campaigns aim to alleviate stress on auto loans

Tisco offers a debt repayment program

People browse the cars on display at the Bangkok International Grand Motor Sale 2020. (Photo by Somchai Poomlard)

Auto loan providers have launched new debt restructuring programs to control non-performing loans (NPLs) after forecasting an increase in bad debts in the first quarter due to the impact of the pandemic.

Tisco Bank, the country’s main auto lender, has launched a debt repayment campaign for customers who buy commercial vans, which largely operate in tourism-related businesses and have been hit by the pandemic.

The bank launched the campaign late last year for companies operating passenger vans, which are reviewed on a case-by-case basis, President and COO Sakchai Peechapat said.

The solution is a financial instrument to help clients who cannot repay their debts close their loan accounts and maintain good credit with the National Credit Bureau.

Payments for borrowers average between 15,000 and 25,000 baht per month.

In view of the prolonged slowdown in tourism, most operators of tourism services are unable to generate income, which reduces their ability to repay their debt.

About 200 clients have applied for the debt repayment campaign in the past two months, he said.

“The campaign goes beyond a normal debt restructuring program. With a targeted measure focused on hard-hit customers, it should help them in this difficult situation,” Sakchai said.

As of December 2020, Tisco Bank’s total auto loans outstanding stood at 127 billion baht, or 57% of its total loan portfolio.

About 25% of all auto credit customers applied for the Phase I debt restructuring measure, and most of them were successful in exiting the program after it expired in October 2020.

Approved by the Bank of Thailand, the debt restructuring program has been extended until June 2021 on a case-by-case basis.

Mr Sakchai expects around 10% of auto loan customers to apply for the bank’s second phase debt restructuring program after a new wave of Covid-19 infections emerged in the end of last year.

The reduction in the number of debt restructuring requests is linked to the government’s moderate measures to contain the latest outbreak, he said.

However, auto NPLs are expected to increase slightly in this quarter due to a delay after the expiration of the first phase of the debt relief program, Sakchai said.

With this debt campaign, Tisco Bank aims this year to control bad debts in the auto loan segment to a level not exceeding its current level of 2.5%.

The bank is paying more attention to asset quality than loan growth, anticipating total auto loan growth of 2-3% this year, he said.

For new loan bookings, the bank is targeting a growth rate of 10 to 15 percent as it forecasts domestic sales of new cars at around 800,000 units this year.

Other major players in the domestic auto loan segment have also rolled out relief measures to help customers affected by the pandemic.

Krungsri Auto, an auto loan unit of the Bank of Ayudhya, has reduced disbursements by up to 30% from the initial level.

For customers living in maximum control areas, based on government classification, the company offers a maximum grace period of three months for principal and interest payments for motorcycle loans, and a grace period of three months for principal payments on auto loans.

Krungsri Auto also offers case-by-case debt relief options to help hard-hit customers.

Philip Chen Chong Tan, chairman of Kiatnakin Phatra Bank (KKP), said the bank continues to provide financial assistance to auto loan borrowers on a case-by-case basis and has extended assistance to customers to exit its restructuring program of debt.

As part of a selective strategy, KKP has set its auto loan growth target of 5% in 2021, up from an aggressive growth target of 18% last year.

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