BOT governor urges savings cooperatives to join National Credit Bureau

Meanwhile, the BOT suggests simply amending existing regulations on lending as an alternative to the nano-finance scheme, while its governor has reacted to the concerns of commercial banks over a new loan guarantee act to be implemented by the military regime in February.

BOT Governor Prasarn Trairatvorakul said at a seminar arranged by the central bank, the National Credit Bureau (NCB), and the Cooperative Promotion Department yesterday that improving credit information and financial discipline could solve many problems associated with lending. 

He said the BOT had encouraged savings cooperatives to join the NCB so they can gain more information on debtors, which would allow them to improve their credit analysis, reduce errors in assessing debtors’ ability to repay, and enhance their debt-collection processes.

Such improvements would also increase the stability of the financial system by lowering the number of non-performing loans. Banks would be able to identify those who are deserving of loans because of a good financial history, helping to spur the economy as a consequence, he said.

Prospective borrowers whose credit information is on file with the credit bureau would also find it easier to gain access to finance than others who do not, Prasarn said. This would remind people of the importance of a good credit reputation and encourage them increase their financial discipline, which would also have the effect of decreasing the problem of high household debt.

Currently, none of the savings cooperatives have listed with the NCB, which has information on more than 74 million accounts in its database, but such cooperatives have doled out 10 per cent – Bt1.6 trillion – of the total loans in the financial system.

“Savings cooperatives are an importance mechanism in the financial system since they can reached by smaller clients, and around 11 million people are debtors to them,” he said. 

“The problem right now is that people who deserve to get loans cannot, and those who should not be given a loan can get one. If cooperatives joined the NCB they would gain a vast amount of information that they could use to improve their credit-analysis process. That would be beneficial for themselves, their members, the country’s financial system, and the economy.” 

He said the next step after encouraging savings cooperatives to join the NCB’s database would be to encourage the Bank for Agriculture and Agricultural Cooperatives to do the same thing.  

On the subject of nano-finance, Prasarn said the regulations governing personal loans issued by non-banks could simply be changed to serve people’s needs better, instead of introducing a completely new scheme.

He also noted that the new loan guarantee act to take effect early next year had sparked some concerns among the commercial banks. He said the BOT was in the process of looking for solutions for the banks’ problems before consulting with other government agencies and lawmakers on the matter. 

Commercial banks are concerned that the new law will hamper their ability to collect debt, because while the current process is concentrated on following the guarantor and not the debtor, the new law will lower the burden of guarantors. This means that banks will have to come up with new measures to follow debt and might have to become even stricter with lending if their risks are increased as a consequence of the new law, Prasarn said.