In October 2020, the Bank of Thailand (the “BOT”) issued its Notification No. SorGorSor2. 9/2563 regarding Default Interest Rate Calculation and Application of Repayment Proceeds (the “Notification”) setting out new criteria on default interest and application of debt repayment proceeds for compliance by certain financial service providers1 (the “Financial Service Providers”). Key changes as addressed in the Notification are as follows:
Whilst all of the above criteria apply to revolving and installment credit facilities which the Financial Service Providers enter into with individuals and small and medium-sized enterprises (SME) debtors, only the one concerning the application of debt repayment proceeds under item 4 above applies to large corporate debtors. Notwithstanding this, the Notification will not apply to a syndicated facility agreement if there is any offshore lender not being subject to a supervision of the BOT participating in the syndication.
The Notification will generally become effective on 1 April 2021, except for (i) the rules under items 1 to 4 above in respect of the Financial Service Providers which are nano finance business operators or asset management companies and (ii) the rule on application of debt repayment proceeds under item 4 in respect of all Financial Service Providers, which will become effective on 1 July 2021. In this connection, it is noteworthy that the Notification also has a retroactive effect and will apply to all agreements including those entered into prior to the relevant effective date.
Please feel free to contact the authors for further information about the Notification or any related legal matters.
1 Under the Notification, “financial service providers” include (i) financial institutions, (ii) companies in a financial group whose businesses are personal loan, nano finance, leasing, hire-purchase and asset management companies, (iii) specialised financial institutions, (iv) operators of personal loan under supervision business, (v) operators of nano finance under supervision business, and (vi) asset management companies.
This document is solely intended to provide an update on recent development in Thailand legislation and is not purported to provide a legal opinion, nor a legal advice to any person.