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GSB to benefit from cut in deposit protection

Feb 06. 2012
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By WICHIT CHAITRONG
THE NATION

Deposits with the Government Savings Bank have soared 29.27 per cent to Bt1.53 trillion as investors seek refuge before the Deposit Protection Agency (DPA) limits insurance for deposits to just Bt1 million from August onwards and the central bank plans to

Lersak Chuladesa, president and CEO of the GSB, said the bank’s deposits at the end of last year amounted to Bt1.525 trillion, increasing sharply by 29.27 per cent year on year or equivalent to Bt345.51 billion.

He said the bank had launched many financial products that met customer needs. These products included a three-year premium savings certificate known as lottery savings, a five-year lottery savings, and 11-month and 15-month savings schemes.

“Depositors were very much interested in our products last |year, leading to a high amount of deposits though lottery savings worth Bt900 billion reached maturity,” he said.

As the DPA will reduce insu-rance protection from Bt50 million per bank account to only Bt1 million from August this year, it will also bring fund flows to the GSB, a |state-run bank that provides 100-per-cent protection to customers, he said.

However, commercial banks have complained that they are at a disadvantage as state-run banks need not pay a premium of 0.4 per cent of deposits to the DPA. This is enabling state banks to offer higher deposit rates.

The outstanding deposits of GSB already exceed those of Bangkok Bank, Thailand’s largest com-|mercial bank in terms of assets, which had outstanding deposits of Bt1.524 trillion at the end of last |year. The total deposits at Bangkok Bank increased by 11.4 per cent |from Bt1.37 trillion at the end of 2010.

HIGHER RATE

Bankers said the amount of deposits with GSB has beaten commercial banks as the state-run entity offers a higher rate of interest.

For example, GSB offers 1.5 per cent for savings against 0.87 per cent offered by major banks.

Commercial banks are unable to offer the same rate as they have to contribute 0.4 per cent premium of their deposits to the DPA. The central bank plans to collect more premium from commercial banks.

The reduction in the deposit protection has also led to the reallocation of funds as most investors, who do not put their money in stocks choose to deposit in GSB to ensure protection of their investment and also enjoy higher returns.

Most commercial banks could not slash their deposit interest rates even though the central bank’s policy rate was cut to 3 per cent.

Lersak said his bank’s lending last year increased significantly by 21.60 per cent, or Bt240.15 billion, leading to outstanding loans of Bt 1.35 trillion.

The bank’s assets also rose by 21.12 per cent to Bt1.77 trillion. The bank had a profit of Bt17.6 billion, |he said. While non-performing |loans represented only 0.94 per |cent of total loans, NPLs were down from 1.2 per cent last year, said Lersak.

The GSB will continue to provide attractive savings rates and offer more loans to low-income groups, he added.

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