Finance Minister Apisak Tantivorawong has instructed two state-controlled banks to set up a permanent unit tasked with solving underground lending problems.
Establishment of the permanent unit and availability of loans to those who are in dire need are integral parts in uprooting loan sharks, he said.
The two state-backed banks assigned to handle underground lending problems are the Government Savings Bank (GSB) and the Bank for Agriculture and Agricultural Cooperatives (BAAC).
In parallel with the planned incorporation of units to cope with the issue, the government will tighten measures in a bid to get rid of underground lending, said Mr Apisak.
Even though the Civil and Commercial Code prohibits non-financial institutions and individual lenders from charging interest rate of more than 15% per year, loan sharks still impose as much as 20% per day because of insufficient law enforcement.
The Justice Ministry late last year warned that the problem of loan sharks had not improved based on the number of complaints to the ministry from debtors, despite a government emphasis on stopping underground lending. Pol Lt Col Wichai Suwanprasert, head of the ministry centre for helping debtors, said it received over 200 complaints a year with the total value of debts to loan sharks exceeding 1 billion baht per year.
The government's economic team under former deputy prime minister MR Pridiyathorn Devakula approved nanofinance operating licences aimed at giving low-income earners more access to formal financial sources and discouraging them from using loan sharks.
Some 100,000 people owing money to loan sharks registered with the government under its debt restructuring programme initiated by ex-finance minister Sommai Phasee, but the number of those who want to restructure debt has been reduced to 30,000 with debt of 3.3 billion baht as most have managed to settle the debt with loan sharks.
In related news, BAAC president Luck Wajananawat said his bank was considering either directly lending to those who need a lifeline or lending through community mechanisms to help these people escape from recurring underground lending debt traps.
He said Mr Apisak wanted both the GSB and BAAC to apply the interest rate set for the nanofinance scheme of no more than 36% a year, or 3% a month, in lending to low-income earners. The BAAC is expected to charge a rate below that charged by nanofinance companies as the former has never charged an interest rate of more than 1% a month, said Mr Luck.