SCB pushes debt restructuring for SMEs
THE TROUBLED situation of SMEs has prompted several banks to launch both normal practices and special measures to help their customers, while Siam Commercial Bank has had to become more proactive about offering debt restructuring.
Last week, several banks jointly provided assistance to small and medium-sized enterprises through normal practices such as waiving principal payments, extending debt payments and trimming loan interest rates by 10-25 basis points.
Some major banks are preparing loans for only debt restructuring. For example, SCB has allotted Bt30 billion for this purpose to SMEs.
Vipon Vorasowharid, first executive vice president and head of business banking at SCB, said that in the first three months, the bank lent more than Bt30 billion to SMEs, of which Bt17 billion was restructured to support customers facing liquidity crunches.
The bank needs to adjust the process of debt collection and launch proactive measures to prevent loans from going bad.
“Debt collection from SMEs in the past was running as normal, but in these difficult times, the normal practice might be late and the borrowers might turn into bad debtors faster than the bank expected,” he said.
The behaviour of SMEs will tell SCB whether their business is getting worse. The bank has no need to wait for delays in payment. It will send a special team to talk with the SMEs showing bad signs, what it calls the early stage, to offer the right help, he said.
Borrowers hit a wall
The bank has classified customers into high, medium and low risk because each one has different problems.
SME borrowers have hit a wall in recent years from the political unrest in the country and the continuous slowdown in the global economy.
The non-performing-loan ratio at SCB’s SME division stands at 4 per cent, mostly from 2012-13 loans. It has spent the past two years solving these NPLs, so the ratio will stay about 4 per cent until next year.
By nature, SMEs are not upstream businesses, so their sales have crashed during the economic slowdown. SMEs that have been approved for credit lines are not yet drawing on them because they have become cautious with their investments.
The bank can, in fact, raise the interest rates on those credit lines, according to the loan contract, he said.
The delay in investment by SME customers has forced the bank to acknowledge that its loan-growth target of over 15 per cent this year is impossible. The actual increase in SME loans this year should be about 7-10 per cent.
The timing is not right for refinance customers to drive loans, while new SMEs are risky unless they have run their business for more than three years and their bank accounts show steady cash flow.
Medium-sized businesses that require loans of Bt50 million of Bt200 million are one focus for SCB, along with small businesses that are not using bank loans currently.
It has added SME counters at branches as a channel to encourage small businesses to consult with the bank’s staff on how to access loans.
“We have promoted My Home My Cash and My Car My Cash products to small businesses because residences and vehicles can be used as collateral for them when accessing bank loans,” he said.
About 60-70 per cent of SCB’s Bt346-billion SME loan portfolio comes from medium-sized businesses.
