Major banks cut rates but effect may be minimal
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Interest-rate cuts by commercial banks might not help drive consumption during what is left of this year, as individual consumers and the corporate sector wait for stability in the domestic political situation and the global economy before increasing thei
Three major banks – Siam Commercial Bank, Kasikornbank and Bangkok Bank – have led the way by announcing cuts in their interest rates for both lending and deposits to help support economy, in line with the Monetary Policy Committee’s decision on Wednesday to trim the policy rate to 2.25 per cent from 2.5 per cent.
Kasikornbank’s minimum lending rate (MLR) has been lowered from 7 per cent to 6.75 per cent, and its minimum overdraft rate (MOR) from 7.48 per cent to 7.38 per cent. The bank’s savings-deposit rate for individual customers is now 0.63 per cent, against 0.75 per cent previously.
Bangkok Bank’s MLR for corporate customers will fall from 7 per cent to 6.875 per cent, and the MLR for retail customers will be cut from 8 per cent to 7.75 per cent. Deposit interest rates will be cut by 0.125-0.25 percentage point. The new rates will be effective on Monday.
SCB
Siam Commercial Bank, meanwhile, on Thursday lowered its MLR by 0.25 percentage point to 6.75 per cent, and its minimum retail rate (MRR) by 0.1 percentage point to 8 per cent. Savings deposits for individuals were cut by 0.125 percentage point to 0.625 per cent, effective yesterday.
Kangana Chokpisansin, head of macroeconomic research at Kasikorn Research Centre, said that without loan demand, the rate-cut policy might not boost the economy by very much, as most consumers have limited capacity for additional debt.
The rate cut could ease their current financial burden rather than generate new loan demand, she said.
She added that given the Thai economic downturn, competition among the banks in chasing deposits to secure liquidity was not as aggressive as before, which meant they were able to cut their rates more quickly than after previous reductions in the policy rate by the central bank.
Asia Plus Securities yesterday noted in its research that the Bank of Thailand’s policy-rate cut would have an impact on the profitability of the banking industry over the next three to six months, as unclear government spending through its mega-project programmes and the political tension would also stem lending demand.
