TBA seeks more talks with BOT on SMEs
The Thai Bankers' Association (TBA) plans to hold further discussions with the Bank of Thailand about a relaxation of the reserve requirement in return for helping out SMEs floundering amid the flagging economy.
Yesterday, the central bank sent a circular to commercial banks and non-banks seeking their cooperation to launch special measures to help four classes of small and medium-sized enterprises – those hurt by the economic slowdown, start-ups, potential SMEs, and SMEs planning to venture overseas.
The measures could include easing some existing lending conditions that might be a barrier to accessing funds for SMEs, such as lowering interest rates on credit lines and restructuring debt.
SMEs that use credit cards for liquidity could be assisted by banks lowering the minimum payment – currently 10 per cent – on the balance due. This is available until June 30.
TBA chairman Boontuck Wungcharoen said after a meeting with members on the association’s five-year plan that even the banks did not follow the central bank in trimming board rates, the banks have helped SME customers by cutting rates over the banks’ benchmark helping SMEs by giving them loans amid the economic uncertainty might be risky, but the banks had firm reserves and capital ratios.
"We will look at the next step in talking with the central bank about the relaxation of the banks’ reserve requirement in order to defend against the expected impact on the industry’s equity," he said.
The BOT’s Monetary Policy Committee on April 29 surprised the market by trimming the policy rate by 25 basis points to 1.5 per cent in a bid to fire up the economy. However, no bank followed the MPC’s lead, since major banks had already trimmed their rates after the MPC cut the rate on March 11.
Boontuck said the banks’ interest-rate decisions should be in line with the market mechanism.
Prasarn Triratvorakul, governor of the central bank, surprised TBA members by joining their meeting and luncheon.
He told reporters before the meeting that monetary policy would only be efficient when commercial banks cooperated with the Central Bank's policy accordingly to stimulate the economy.
Boontuck said what the governor meant was that the central bank wanted the banks to help SMEs get loans to improve their cash flow despite the economic slowdown.
Usually when the economy sours, banks turn conservative in lending.
A million SMEs have accessed more than Bt4 trillion of bank loans. In the first quarter, the SME loan portfolio of commercial banks returned to the growth path by climbing a net 4.5 per cent.
The association showed the governor the banks’ stance on the issue, which was to support SMEs and provide sufficient capital for them to run their businesses. This is part of the TBA’s five-year plan.
Arthid Nanthawithya, deputy executive chairman and chief executive officer of Siam Commercial Bank, said after the meeting that a broad rate cut was not the only way to help SMEs. However, after talking it over with the BOT governor, SCB will consider a rate cut again.
Teeranun Srihong, president of Kasikornbank, said that even though KBank might not follow the MPC’s move, it has methods in place to help SMEs troubled by the economic uncertainty.
The decline in loan yields of the banking industry in the first quarter shows that banks have attempted to help customers in need, he said.
Kosit Panpiemras, executive chairman of Bangkok Bank, said separately that even though the rate cut was positive for economic growth, the low interest rate might bring on speculation in some assets.
People will move out of deposits to high-return investments, so it is essential for the regulator and banks to look after the security of savings, Kosit said.
