High financing costs still hampering
Financing costs for small and medium-sized enterprises are still high despite last week's cut in the Bank of Thailand's policy rate and loans are hard to get from cautious commercial banks, making SMEs reluctant to invest, says the president of the Smal
The BOT’s Monetary Policy Committee lowered the key rate from 2 per cent to 1.75 per cent on March 11, so the Kingdom now has the lowest policy rate in the region.
The BOT’s spokesman said on Monday that the current monetary cost was very low and he urged the private sector to invest now, but so far only three commercial banks, Siam Commercial Bank, Bangkok Bank, and Kasikornbank have lowered their lending rates after the policy-rate cut. Krungthai Bank will follow suit today.
As of yesterday, the minimum lending rates of SCB, Bangkok Bank, and KBank were 6.55, 6.625, and 6.65 respectively. KTB yesterday announced that it was also trimming its MLR by 0.125 percentage point to 6.625 per cent and cutting its fixed deposit rates by 0.10-0.125 point. Its new rates are effective today.
"An MLR of around 6.5-7 per cent is still too high for SMEs, so lowering the policy interest rate only 25 basis points did not change this fact. SMEs will continue to be reluctant to invest because the cost of investment is still too high for them.
"Nevertheless, the fact that the central bank has lowered the rate is somewhat good news," said Sakchai, who is also deputy secretary-general of the Federation of Thai Industries.
He added that the Cabinet’s approval of low-interest loans to be offered by state banks was also a good start, "but there is high possibility that more capital will be required later" by SMEs.
BOT Governor Prasarn Trairatvorakul told the press after a meeting with the National Reform Council yesterday that he believed the reason businesses were not investing was "lack-of-confidence syndrome".
"Some businesses might be waiting to see the [development of the] domestic consumption situation because they have to know that if they invest they will be able to sell their products. Some may be waiting for the government infrastructure projects.
"There are many factors that can contribute to lack of spending confidence, but the important thing is that we need to help each other to build it up," he said. Prasarn also said he was satisfied with the response so far from the commercial banks to the lower policy rate, since it has only been a week since the rate cut.
"The use of monetary policy has limitations in terms of its effect and timing, but so far the responses from the monetary market and business sector have been on the positive side.
"The MPC did not say that interest rates were on a downward trend. Forward guidance is not always good, as seen in the example of the Bank of England, when it had to retract comments that affected the market," he added.
