Govt advises bankers on bond

The Thai Bankers’ Association invited Prime Minister Yingluck Shinawatra and her deputy Kittiratt Na-Ranong on Wednesday to give details on the mega-projects ahead of Parliament’s debate on the bill authorising Bt2 trillion in loans for the investment programme yesterday and today.

Kittiratt told the bankers that the government would also seek overseas funds besides those at home even though the country is awash in liquidity, Twatchai Yongkittikul, secretary-general of association, said yesterday.

The government wants to issue the dollar bonds to set a benchmark. They will not exceed 40 per cent of total loans because they will be used to import capital goods such as equipment to support construction.

The mega-transport programme will run seven years, so the Bt2 trillion will be allocated at about Bt300 billion a year.

The bankers told the government that the private sector worried about how the budget will be spent, but both Yingluck and Kittiratt, who is also finance minister, insisted that the government would ensure that all projects were carried out transparently. The government plans to invite the private-sector Anti-Corruption Network to help monitor the projects.

The government also floated the idea of setting up a specialised financial institution to look after share loan borrowers loan-shark customers to help ease household debt. The institution will do only lending. Its interest rates might be higher than commercial banks’ but will still be lower than the loan sharks’.

"Rising household debt is found among grass-roots people, who are mostly borrowers from the non-financial system rather than commercial banks. Both the government and bankers have the same view that the debt from loan sharks should be resolved," Twatchai said.

Bankers also gave the two an overview of the economic situation in the second half. Even though the economy is likely to show some sluggishness, loans in the banking industry can still grow, he said.

Kannikar Chalitaporn, president of Siam Commercial Bank, said loans were still expanding but the bank had be more cautious about lending to customers who are too risky.

The bank targets loan growth no higher than 12-15 per cent this year, even though the first half performed better than that, she said.

The government assured the bankers that the mega-projects that can be implemented would have an investment budget of Bt100 billion. That will benefit subcontractors, a focus of SCB.

If the government projects can be launched next year, they will drive economic growth and lending. SCB hopes loan growth next year will be better than this year, but expects it still to be lower than last year.

Liquidity has been tightening for many years, reflecting the tense competition in the deposit market. Even though lending has cooled down, banks keep chasing deposits.

The surge in household debt has not affected savings because those overstretched households consisted of lower-income earners who rarely deposit money with banks.

SCB supports the government’s proposal to form a specialised financial house to solve the grass-roots debt problem, Kannikar said.

The bank does not eye those with a monthly income below Bt10,000 because it has no expertise in this segment, she added.

Predee Daochai, president of Kasikornbank, said loan demand was still apparent but the bank was not aggressively seeking more business. It is limiting loan growth to 9-11 per cent. In the first half, KBank’s loans were up by 4.7 per cent.

Lower-income earners are also not a prime market of the bank, so its ratio of bad loans is stable at 2 per cent.

The bank’s liquidity is now at a satisfactory level, so it will maintain the loan-to-deposit ratio at 95-98 per cent.