BOT targeting some suspicious lending by non-bank institutions
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The Bank of Thailand is turning its radar towards non-bank financial institutions, which are disguising personal loans as hire-purchase loans to charge a higher interest rate illegally.
By doing so, they can charge more than 15 per cent per annum, while the maximum rate for personal loans as specified in the Civil and Commercial Code is 15 per cent.
“The central bank is considering options to tackle these institutions,” Bank of Thailand Governor Prasarn Trairatvorakul said yesterday.
“As far as we know, some companies seem to extend credit for purchasing products but the products are returned in only one day. Actually, this is classified as a personal loan.
“They use this method as hire-purchase loans are excluded from the civil law that requires them to charge interest rates of no more than 15 per cent. Trading transactions are not counted as lending,” he said.
The authorities are considering proper ways to handle the situation and these institutions, Prasarn said.
The hire-purchase (lease-to-own) business is beyond the BOT’s supervision as, according to National Executive Council Announcement No 58, the central bank has the authority to regulate only personal and credit-card loans.
On Monday, Prasarn met with MR Pridiyathorn Devakula, a former deputy prime minister and finance minister.
“In this specific case, he said some provincial companies extended loans at high interest rates. However, whether the central bank has the authority to look over them or not, we need to seek more information,” Prasarn said.
One article of the Financial Institutions Business Act states that the central bank could oversee this issue, but that authority needs a royal decree.
We “may need to discuss this issue with the Finance Ministry first as it has to propose the royal decree”, Prasarn said.
Satorn Topothai, senior director of the BOT’s legal and litigation department, said the central bank had uncovered some disguised loan extensions done by both juristic persons and individuals.
Most cases end at the primary courts as the wrongdoers plead guilty and get away with a fine, he said. There was one filed in Chiang Rai, and the central bank won that case in the Appeals Court, he added.
