KBank boss questions single lending limit
Banthoon says rule worsens inequality
Kasikornbank (KBank) chief executive Banthoon Lamsam has raised concerns over the Bank of Thailand’s single lending limit, saying the rule could be a factor in widening inequality.
Mr Banthoon told the Bangkok Post that the central bank’s rule, which restricts loans to a particular group of companies at 25% of each bank’s first-tier capital, has allowed a single group of firms exposure to a huge amount of loans while many small and medium-sized businesses lack access to sources of funds.
Fierce competition in the banking sector has also forced banks, including KBank, to extend massive loans to large customers.
“We [KBank] are trying to limit lending to not reach the 25% ceiling, but pressure from competition has emerged as customers tell us that our competitors agree to give more loans, so why can’t we,” Mr Banthoon said.
The former chairman of the Thai Bankers’ Association proposes that the Bank of Thailand cut the ceiling to some extent, for example to 20%.
“One factor behind inequality in the country is the ability to access sources of funds,” Mr Banthoon said. “As a result, the stake of those who are in the upper part [of the income pyramid] should be reduced. They have higher education, higher power and higher capital. How can those in the lower part can catch up? The [inequality] problem must be solved by policymakers.”
Those business operators that want more capital should mobilise funds from capital markets such as the stock market instead of low-cost bank loans, which come from people’s savings.
Mr Banthoon said KBank still supports large businesses, as they form a crucial
part of the country’s development.
“Still, the question is why only a few companies can enjoy a massive source of funds while millions find it difficult to access,” he said.
In addition, adjusting the single lending limit could also reduce risk in the event of an unexpected situation.
“I don’t expect any business that is able to secure such huge loans from banks will collapse [causing huge bad debts], but we can’t rule out the possibility,” the KBank
president said. “The 1997 financial crisis was a lesson learned, as many large businesses collapsed in the crisis.”
Mr Banthoon said land ownership is another factor behind inequality. Some people own hundreds of thousands of rai in land plots, while others lack land to make their living.
Bank of Thailand governor Veerathai Santiprabhob said earlier that any new measures concerning the single lending limit must first be thoroughly considered.