The Bank for Agriculture and Agricultural Cooperatives (BAAC) has set a new loan target this year at 76.7 billion baht, nearly 30 billion lower than last year as it shifts focus to efficiency rather than expansion, says senior executive vice-president Somsak Kangteerawat.
"Loan growth is not our mission when our debtors, who are mostly farmers, still have such high accrued debts. If we try to promote more loan growth, it will mean they will sink deeper in debt. The bottom line is quite dangerous," Mr Somsak said.
Somsak: Bottom line dangerous
"This year we'll focus on value-added creation rather than expansion."
The BAAC's loan growth has expanded rapidly in recent years, in line with the previous government's policy that required it, as a state bank for agriculture, to be the government's tool for subsidising the farm sector, especially for the rice-pledging scheme.
"This year we will look towards improving ourselves to ensure our long-term competitiveness," Mr Somsak said.
"We're the state bank for agriculture, so of course high growth in new loans will create profit.
"But we are not profit-oriented even though we have to be able to stand on our feet sustainably."
Of the 76.7-billion-baht target, 35-40% will go to rice farming, while the rest will be for lending to various crops such as tapioca, corn and rubber as well as livestock.
The bank is expected to report loan growth to 105 billion baht for fiscal 2014 ending March 31, near its target of 108 billion. Net profit is anticipated to be near 9 billion baht, also close to its earlier target.
Mr Somsak attributed the near misses to the economy growing more slowly than expected last year as the government decided on policy.
"Once government policy is clear, borrowers can make their plans, and our lending can progress too," he said.
The BAAC's outstanding loan portfolio is projected to be 850 billion baht at the end of next month.
On the deposit side for fiscal 2014, outstanding deposits are expected to total 1.19 trillion baht including 40 billion in new accounts, much lower than the target of 90 billion.
"The shortfall does not matter that much, as we've found big accounts that shifted their savings to other banks were short-term depositors, which is not our main deposit target," Mr Somsak said.
"The 40 billion baht worth of new depositors are long-term depositors who more closely fit with what we're looking for in terms of our target clients."
The bank did not launch a campaign to lure depositors last year amid fierce competition from commercial banks offering competitive deposit rates.
For fiscal 2013, the BAAC recorded new deposits of 152 billion baht, much higher than its target of 82 billion, as the bank needed liquidity at that time, which consequently increased the BAAC's financial costs.
"We will chase loan growth only when it is essential to do so, as that will affect our costs," Mr Somsak said.