Thailand’s cabinet has greenlit a 100 billion baht (US$2.8 billion) soft loan initiative, allowing commercial banks to access funds at favorable rates to subsequently lend to borrowers below market rates, as announced by a deputy finance minister following a cabinet session.
The objective of this program, according to Deputy Finance Minister Paopoom Rojanasakul, is to facilitate easier access to loans for small businesses. Under the scheme, the Government Savings Bank (GSB) will extend liquidity to commercial banks through loans at a nominal interest rate of 0.01%. This initiative aims to enable these banks to provide loans to small enterprises at rates not exceeding 3.5% over a three-year period.
At present, retail lending rates offered by Thai banks stand above 7%. Mr. Paopoom emphasized that this scheme will infuse capital into the financial system, clarifying that the resources for this initiative will be sourced from the state bank’s financial performance rather than the national budget.
The government views this initiative as a response to the restricted lending by banks amid a sluggish economic rebound and a surge in nonperforming loans. Prime Minister Srettha Thavisin has indicated plans for further measures, including addressing high electricity prices, to stimulate growth in Thailand, the second-largest economy in Southeast Asia.
In April, Thai banks announced a 25 basis point reduction in lending rates for vulnerable demographics over a six-month period, following a request from the prime minister. Despite calls from Mr. Srettha to lower rates, the Bank of Thailand (BoT) maintained its key interest rate at 2.50% for the fourth consecutive meeting last month.
The BoT anticipates a 2.6% expansion in the economy this year, following a 1.9% growth in the previous year that lagged behind regional counterparts.
