The new COVID-19 outbreak which has dragged on into 2021 continues to affect economic activity that had previously been on the verge of recovery. Such circumstances have further intensified the issues of financial vulnerability, lack of liquidity and deteriorating debt servicing ability among many groups of debtors. The Bank of Thailand (BOT) recently extended the period for retail borrowers to register for financial assistance from now until June 2021. Financial institutions have also been urged to expedite the issuance of relief measures to every group of debtors appropriate for their specific loan, taking into account the debtors' risks.
While the new COVID-19 outbreak will have an adverse impact on the recovery of economic activity and extension of new loans by financial institutions, it is expected that the continuation of relief measures, especially through debt rescheduling, extension of debt repayment period, offering of revolving credit facility and liquidity enhancement, will help to alleviate some of the pressures associated with loan repayment. As a result, total loan outstanding in 2021 may not experience a significant slowdown in spite of mounting economic risks. Meanwhile, the accelerated process of debt restructuring under the BOT's relaxed criteria on debt classification which will remain in effect until the end of the year, and the accelerated and proactive process of NPL management, should help to keep a lid on NPLs, to some extent
KResearch views that the key issue to monitor during this period is the number of debtors who have registered for the new round of assistance measures, which may increase in line with the economic impacts of the new COVID-19 outbreak. Not only would this data on aiding debtors of financial institutions indicate the level of pressure placed upon the asset quality of commercial banks' credit portfolio post COVID-19, but it would also affect their provisioning guidelines.
KResearch perceives that the extension of relief measures for retail customers is merely a stopgap. Most of the guidelines focus on an extension of the BOT's Phase II relief measures for retail borrowers. In fact, such guidelines do not extend to specific measures for businesses that are currently bearing financial burdens from the new wave of the COVID-19 pandemic. It is expected that financial institutions, both specialized financial institutions (SFIS) and commercial banks, will continue to closely watch and offer ongoing support to their clients in each industry/business location.