The cabinet yesterday approved the Finance Ministry's proposal to extend deposit protection amid uncertain economic conditions.
Finance Minister Apisak Tantivorawong said the government aims to boost confidence in bank depositors and trust in the country's monetary and fiscal stability.
The Deposit Protection Act of 2012 calls for a cut in the ceiling for deposit guarantees to 1 million baht per depositor per bank from 25 million baht by Aug 11 this year.
But with the cabinet's approval yesterday, the cut in deposit protection will be made in steps, with protection for 25 million baht worth of deposits at the bank until Aug 10. Protection will be in place for 15 million baht in deposits between Aug 11, 2016 and Aug 10, 2018; for 10 million between Aug 11, 2018 and Aug 10, 2019; for 5 million between Aug 11, 2019 and Aug 10, 2020; and for 1 million by Aug 11, 2020.
Bank of Thailand governor Veerathai Santiprabhob said the extension had nothing to do with the stability of financial institutions as commercial banks have a solid capital base and a high liquidity surplus.
Moreover, all commercial banks have already prepared for the cut in the maximum deposit guarantee to 1 million baht per account per bank as earlier scheduled and the central bank has found no irregular movements of deposits, Mr Veerathai said.
The delay is meant to allow time for adjustment and financial planning.
According to Mr Veerathai, the postponement will also be a boon to the lending rate as commercial banks would not launch the special deposit rates to attract large depositors and they will then be able to keep the low lending rates for a while to accommodate the economic pickup, he said.
In a related development, the cabinet yesterday also approved the 167-kilometre double-track rail linking Prachuap Khiri Khan and Chumphon, worth 17.29 billion baht. Bids for construction are scheduled for May and August, with construction likely to start by September.
The project has been approved for an environmental impact assessment (EIA).
Government spokesman Sansern Kaewkamnerd said the cabinet also approved in principle the development of two other double-track rail projects: the 165-km Nakhon Pathom-Hua Hin route, worth 20.14 billion baht, and the 90-km Hua Hin-Prachuap Khiri Khan route, worth 10.3 billion baht.
EIAs are currently being conducted for the two projects. Bids for their construction will be called by June and September, with construction starting by October.