Higher NPL cap rejected
Ministry may consider compromise option
A request by the Thai Bankers’ Association (TBA) to raise the cap for bad-loan coverage under the portfolio guarantee scheme (PGS) of the state-owned Thai Credit Guarantee Corporation (TCG) to 30% is “too much”, says Finance Minister Sommai Phasee.
The current credit guarantee capped at 18% is appropriate, and the request for the TCG to shoulder non-performing loans (NPLs) for SME loans of up to 30% is too much because the government is going to allocate more of its budget to cover education, public health and other major expenses, he said.
A Finance Ministry source said the ministry might propose a compromise option — sharing the responsibility between TCG and lenders for bad loans of over 18% but not exceeding 30% — in a bid to help SMEs access funding.
SMEs, the backbone of the Thai economy, have been the hardest hit by the stuttering economy, and banks are reluctant to lend to them due to concerns about NPLs. Under the PGS, TCG shoulders up to 18% of bad loans while lenders take responsibility for the rest.
Bank of Thailand data show NPLs for SME loans climbed to 149 billion baht at the end of March from 138 billion at the end of last year. Special-mention loans, which are delinquent for 30-90 days, surged to 115 billion baht in the same period from 107 billion at the end of 2014. Higher special-mention loans indicates a potential increase in bad loans.
As of March 31, SME loans totalled 4.54 trillion baht.
The central bank recently sent a circular to financial and non-bank institutions engaged in credit-card business asking for their cooperation in supporting four main SME groups — those affected by present economic conditions, new business operators, firms with growth capabilities and those planning to expand into Asean and other foreign markets. Possible measures that could support these SMEs include consideration of more lenient repayment terms, lower interest rates on loans and debt restructuring, and reduction of the minimum payment on credit-card debt shouldered by SMEs that use credit cards for business purposes.
The last measure could allow instalment payments of less than 10% of the outstanding balance, subject to the discretion of the lending institutions.
The government recently approved low-interest loans worth 15 billion baht lent by the state-owned Small and Medium Enterprise Development Bank of Thailand (SME Bank) to SME operators. SME Bank charges borrowers 4%, while the government absorbs another 3% of interest. If SMEs want the TCG to guarantee their loan, the Finance Ministry will pay the first-year fee of 1.75% of the loan amount.
Mr Sommai said his ministry was set to launch a valued-added tax (VAT) invoice prize campaign to encourage consumers to ask for invoices from shops in order to stem tax-avoidance loopholes. Holders of invoices will win prizes if their VAT invoice numbers match the winning numbers of government lottery tickets.
In 2005, the Revenue Department held a lucky draw campaign to lure consumers into requesting VAT invoices when buying goods or services, but the project was scrapped as operators themselves sent in invoices that customers did not receive to win the prizes.