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Product offers higher returns than deposits
SOMRUEDI BANCHONGDUANG
Apichart Kasemkulsiri, a senior executive vice-president for ACL Bank, explains the bank's new bills of exchange products at a briefing yesterday. |
ACL Bank, one of the country's smallest banks, is moving away from traditional deposits to focus on bills of exchange as a vehicle to raise funds.
The bank yesterday launched its newest bill of exchange (B/E) product, the ACL B/E Convertible. Depositors can convert the notes to a fixed deposit account at any time, with 3.3-3.75% interest per year compared with the bank's fixed deposit rate of 2.75-3.5% for three -to 12-month terms.
The minimum investment for the new product is 500,000 baht.
Bank executives said the shift to new instruments was made in anticipation of the launch of the new Deposit Insurance Agency in August.
Within five years, protection for bank deposits would be reduced from unlimited coverage now to just one million baht per customer per institution.
Most bankers expect the launch of limited insurance coverage to encourage depositors to shift to fixed income funds and alternative debt instruments. Customers would be able to take advantage of higher returns while maintaining low credit risk, said the company.
Apichart Kasemkulsiri, a senior executive vice-president for ACL Bank, said the bank hoped to meet up to half of its funding needs through debt instruments such as B/Es from 20% now.
He said B/Es offered an attractive alternative for many corporate and high net-worth depositors.
Mr Apichart said competition in the banking sector was increasing steadily, both in terms of product features and interest rates as banks sought to protect their depositor base.
Rising inflation and interest rates would also raise competitive pressures in the banking sector.
For ACL, B/Es would be the bank's main funding instruments for the next six to 12 months, Mr Apichart said.
''We see the expansion in B/Es to come primarily from our current deposit base,'' he added.
ACL has 45 billion baht in deposits, with a target to reach 60 billion by the end of the year.
The main focus for the new instruments was on depositors with minimum funds of 500,000 baht to two million, Mr Apichart said.
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