Concern over high loan growth of state-run banks

Speaking at the Bank of Thailand’s symposium on “Keeping Pace with Rising Asia”, Supavud Saicheua, managing director for research at Phatra Securities, pointed out that loans extended through state-owned financial institutions had soared from 8 per cent of total loans previously to 26 per cent now, while loans extended through commercial banks fell from 77 per cent to 74 per cent.
As well, the populism of 2001-05 became a major formula for political success that the current government hopes to replicate, he said.
Prasarn Trairatvorakul, the BOT governor, shared Supavud’s concerns. Specialised state institutions are set up for specific purposes. The central bank has a duty to inspect them, while overall supervision lies with the Ministry of Finance.
The concern is the mindset that political success comes from populism, Prasarn said. If the nation’s budget is not sufficient to finance the government’s policies, other tools are expected to be used, he said. This is not a proper mandate for the central bank and the Finance Ministry, he added.