BANGKOK: Thailand’s cabinet on Tuesday ( Jul 16 ) approved a 100 billion-baht ( US$ 2.8 billion ) soft loan scheme where funds would be lent to commercial banks so they could on-lend to borrowers at below-market rates, a deputy finance minister said.
After a government conference, Paopoom Rojanasakul stated to reporters that the program aims to assist smaller businesses in getting loans.
Commercial banks will be able to borrow money from the state-owned Government Savings Bank at an interest rate of 0.01 percent, he said, to allow them to contribute to small companies at a rate of no more than 3.5 % for three years.
Thai banks now have rates of more than 7 percent for retail lending.
” This will add investment into the system”, said Paopoom, adding the steps drew from the state company’s bottom line and not the funds.
The government claims that the program is a result of bankers tightening their lending in response to the sluggish economic recovery and rising bad debts.
In order to encourage economic growth in Southeast Asia’s second-largest economy, Prime Minister Srettha Thavisin has promised more steps the following year, including help for high energy prices.
In response to the prime minister’s plea in April, Thai lenders announced that they would reduce financing costs by 25 basis factors for vulnerable groups for a six-month period.
Srettha has consistently persuaded the central bank to lower interest rates to support the economy. The central banks held its vital interest rate low at 2.50 per share for a third consecutive meeting last month despite the pressure.
The central bank anticipates a 2.6 % growth in the economy this year, up from a 1.9 % increase last year, which was slower than regional peers.