Specialised financial institutions would focus on retail services that commercial banks do not provide under a new SFI reform plan from the Fiscal Policy Office (FPO).
This would foster greater access to financial sources by the public and prevent business overlap.
However, commercial banks would not be prohibited from entering into business areas in which SFIs under Finance Ministry supervision operate.
FPO director-general Somchai Sujjapongse said setting the business direction of SFIs in such a way as to reduce competition with commercial banks is a major tenet of the reform plan.
The plan has already been submitted to Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong for consideration.
It calls for a committee to be set up to supervise SFIs, with the FPO serving as secretary to the committee.
SFIs were set up by the government under separate laws to serve its development and investment policies. The eights SFIs are under the supervision of the FPO and the State Enterprise Policy Office and their operations are inspected by the Bank of Thailand.
They are the Bank for Agriculture and Agricultural Cooperatives, Government Savings Bank (GSB), Government Housing Bank, Islamic Bank of Thailand, Small and Medium Enterprise Development Bank of Thailand, Export-Import Bank of Thailand, Secondary Mortgage Corporation and Thai Credit Guarantee Corporation.
Among these, the GSB offers the most similar financial services to commercial banks.
The planned revamp comes after several SFIs became saddled with high levels of bad loans.
Mr Somchai said since SFIs' businesses are more risky than those of commercial banks, they would not have to comply with some criteria such as Bank of Thailand classifications of non-performing loans (NPLs).
However, the minimum capital adequacy ratio of 8.5% of risk-weighted assets that the Bank of Thailand requires would be applicable to SFIs.
Mr Somchai said the reform plan also proposes a revision of laws governing some SFIs in order to allow them to broaden their business scope.
As well, all SFIs may need to be regulated under a single law instead of falling under separate laws at present for more efficient control by the Finance Ministry.
The reform plan is aimed at strengthening SFIs and reducing the government's burden of injecting fresh money into them.
As of March, outstanding loans of the eight SFIs plus state-owned Krungthai Bank (KTB) and government pawnshops amounted to a combined 5.11 trillion baht, while their NPLs stood at 192 billion or 3.76% of total lending.
KTB is a state-owned bank, but it is supervised by the Bank of Thailand.