GH Bank issues promise to restrict interest rate hikes

State-run Government Housing Bank (GH Bank) vows it will not rush to raise interest rates immediately if the Bank of Thailand increases the policy rate, says bank president Chatchai Sirilai.

He said the bank would try to keep its interest rates below market rates to help alleviate the burden on its customers.

Mr Chatchai expects the central bank to raise the policy rate two or three times this year, each time by 25 basis points. However, he said the increases should not exceed a total of 50 basis points this year.

GH Bank’s board of directors recently approved a plan to keep interest rate hikes to a level below the market rate. For example, if the market rate were raised by 0.25%, the bank would only raise its rate by 0.15%.

If the central bank raises the rate in August, GH Bank would raise its rates in October, said Mr Chatchai. If the central bank raises the rate at the end of this year, GH Bank would increase its rate early next year.

The bank’s non-performing loans stand at 4% and are expected to increase by 0.2 percentage points or 5 billion baht this year. GH Bank set its reserves for bad debt at a rate of 100%.

The bank upgraded its lending target for this year to 280-300 billion baht from 220 billion.

Government Savings Bank previously vowed to try to maintain its interest rates for as long as possible amid a trend of rising rates globally, aiming to alleviate the burden on its borrowers.

On Wednesday, Finance Minister Arkhom Termpittayapaisith asked the central bank to hold discussions with commercial banks as to whether they could raise their interest rates on a gradual basis if the central bank decides to raise its policy rate.

Central bank governor Sethaput Suthiwartnarueput recently said increasing the policy rate should not happen too late because inflation is continuing to rise.

At the June meeting of the central bank’s Monetary Policy Committee (MPC), the group voted 4-3 to maintain the policy rate at 0.5%, the level it has been anchored at since May 2020. The three members who voted to raise the policy rate sought an increase of 0.25 percentage points.

The MPC’s next meeting is scheduled for August. Many research houses expect Thailand to begin a cycle of policy rate hikes in the second half this year in response to high inflation.