The Bank of Thailand is mulling cutting interest rates to help people struggling with debt to exit from a pernicious cycle, says a central bank executive.
The central bank has been talking to the Thai Bankers' Association (TBA) and other related parties to find solutions to manage the country's swelling household debt.
Cutting interest rates would help vulnerable borrowers who have carried persistent debts for a long time, said central bank deputy governor Ronadol Numnonda.
He said the regulator will set out three initiatives for responsible lending, risk-based pricing and macroprudential policy this month in an effort to help solve the country's household debt problem.
The central bank will then hold a public hearing on the three guidelines, Mr Ronadol said.
TBA chairman Payong Srivanich said all related parties should consider the consequences of a rate cut, as it may lead to moral hazard.
To solve the household debt problem, he said the related parties should examine responsible lending by financial institutions, increased access to funding on a fair and equal basis, as well as borrowers' debt repayment abilities.
Financial institutions will help borrowers to improve their financial discipline, Mr Payong said at yesterday's meeting of the Joint Standing Committee on Commerce, Industry and Banking.
The private sector panel suggested the new government should deal with the problem of household debt through economic policies that improve the labour market and people's income.
Businesses are ready to collaborate with the new government in supporting economic expansion and reducing household debt, he said.
In a related development, Mr Payong said the TBA plans to talk to the central bank and National ITMX Co Ltd, the digital payment infrastructure systems provider for commercial banks, about finding solutions to improve digital banking services after the industry registered a digital glitch on Saturday.
The TBA plans to propose the central bank separate digital transactions from basic financial transactions and occasional transactions in order to reduce the frequency during peak periods, he said.
"Occasional transactions, such as on lottery days, can create an enormous flow and could lead to a system shutdown," said Mr Payong.
"If banks separate the occasional transactions from basic financial transactions that are necessary for mobile banking users, it would mitigate such problems."
He said the banking sector does not have a problem in terms of capacity for mobile banking services.
The full capacity for digital banking services is 10,000 transactions per second, while the actual usage during peak periods is only 3,000 transactions per second, said Mr Payong.
The central bank is expected to continue normalising the policy rate for both deposits and loans to a level that is consistent with sustainable growth in the long term, with further hikes conditional on the market.
Banks are ready to assist low-income borrowers in the vulnerable segment through long-term debt restructuring if they are affected by rising interest rates, he said.
