The state-owned SME and Islamic banks are struggling to survive after having to shore up huge non-performing loans (NPLs) from careless lending by their managements, especially to their friends and political bosses. The two banks have combined NPLs of a staggering 70 billion baht, or 30% of 210 billion baht in loans extended.
To save the SME bank from going under and to ensure customers that their deposits are safe and the problem will be taken care of, the government is considering merging the troubled bank with the Government Savings Bank, which is financially stronger and more stable.
But the fate of the Islamic Bank is yet to be decided despite a suggestion from a former deputy finance minister that it should be merged with another state-owned bank, Krung Thai. The Islamic Bank's management is confident the NPL problem can be resolved.
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