Bank withdrawals force rice loan rethink
- Published: 17/02/2014 at 11:24 AM
- Online news:
Payments to rice farmers began but were severely limited after pressure on participating banks increased. The Government Savings Bank’s president, who admitted to providing much of the money, said depositor withdrawals were unusually large today.
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GSB president Worawit Chailimpamontri explains that the loan to BAAC was not directly connected the rice-pledging scheme. Clearly bank customers didn't believe him as they rushed to close their accounts today. PORNPROM SATRABHAYA
Here is the latest on the rush to withdraw money from Government Savings Bank branches from our online reporters
Withdrawals were heavy throughout the day from GSB branches. PATTARAPONG CHATPATTARASILL
Government Savings Bank (GSB) president and chief executive Worawit Chailimpamontri on Monday admitted that the bank is experiencing an unusual rate of cash withdrawals following its decision to indirectly loan funds to pay farmers owed money under the rice-pledging scheme.
The GSB chief on Sunday confirmed a five billion baht loan to the Bank for Agriculture and Agricultural Cooperatives (BAAC) to make overdue payments to rice farmers under the rice-pledging scheme. But he said the bank could withdraw the loan if it looked like the deal could damage GSB's finances. Both banks are state-owned.
Mr Worawit on Monday linked cash withdrawals from several branches to the inter-bank loan to BAAC and said the loan would be used to shore up the BAAC's liquidity for no more than 30 days.
''All bank managers have been directed to explain to customers that the bank has no involvement in the rice-pledging scheme as reported,'' Daily News Online quoted him as saying.
All branches were ordered to double their cash reserves to cope with the large quantities of money withdrawn by clients, he added.
It has been a difficult day for the Government Savings Bank (GSB) as depositers have flocked to many branches to withdraw large sums of money or even close their accounts. Several branches ran completely out of cash and had to issue cashier checks instead. To help relieve some of the pressure, the Bank for Agriculture and Agricultural Cooperatives (BAAC),the recipient of a 5 billion baht loan which was to go to pay rice farmers in the rice-pledging scheme, announced this afternoon that is delaying payments pending a meeting with the Finance Ministry. Thus, there were many disappointed farmers today to who gone to their local BAAC branches only to find the government had not yet transferred money to their accounts.
Large number of depositors are reported at GSB branches this morning, many of them withdrawing funds or closing their accounts altogether. This photo was taken at the bank's headquarters in Bangkok. SOMCHAI POOMLARD.
Reports are coming in this morning that large numbers of Government Saving's bank depositors are withdrawing their money, more than 10 million baht in the first hour, according to Thai PBS. (But there are also reports of some people depositing money.) The amount paid to farmers today is likely to be far less than four billion, the report said.
Meanwhile, a large group of farmers has gone to the prime minister's temporary office at the Defence Ministry's office of the permanent secretary in Muang Thong Thani demanding to speak to Ms Yingluck. Thus far, no government representative has gone down to see them.
Unions blast rice loan scheme
Govt says farmers will be paid from today
The Government Savings Bank’s 20-billion-baht loan to the Bank for Agriculture and Agricultural Cooperatives (BAAC) came under strong opposition by their labour unions yesterday, casting doubts on the government’s bid to begin paying farmers for the rice sold under the pledging scheme today.
The caretaker government, however, insisted the farmers will gradually receive long-overdue money from today.
The labour union of GSB yesterday issued a statement calling on the management to cancel the loan to the BAAC, saying the deal was undermining depositors’ trust for the bank.
Likit Klinthanom, the president of the Government Savings Bangkok labour union is interviewed by the media today at the bank's headquarters. He explained why union members oppose the loan to the BACC. SOMCHAI POOMLARD.
It has called on the management to seek the return of the transferred fund and suspend any lending that would affect confidence in the bank.
The union demands that management immediately stop lending to the BAAC, call back previous loans provided to the BAAC and stop any transaction which will cause the clients’ confidence to erode.
The move came after a campaign on social networks to withdraw deposits from the GSB began spreading, following reports that the lending would be used to pay for the farmer’s rice pledging debts.
Representatives of the BAAC labour union said yesterday it was not clear where the money earmarked to pay the farmers came from.
The union was ready to take action if it turned out the cash came from the GSB’s loan.
Worawit: The lending will not put GSB depositors’ money at risk. PORNPROM SATRABHAYA
At yesterday’s press conference, GSB president Worawit Chailimpamontri said the lending of 20 billion baht was not meant to support the troubled rice-pledging scheme.
When the board was asked to approve the lending, there was “no request’’ that the money would be used to fund the rice pledging scheme, he said.
Of the total credit line, a few billion baht was transferred to the BAAC, he said.
Mr Worawit also asked the depositors not to withdraw their money from the bank following a report that the online community was urging people to withdraw and close their accounts with the GSB.
He said the lending will not put the depositors’ money at risk, adding that the GSB also extended interbank loans worth more than a hundred billion baht to 35 more banks.
Speculation was high that the cash would be used to pay the farmers’ debts as caretaker Commerce Minister Niwatthamrong Bunsongphaisan assured yesterday that the BAAC would today start paying the farmers.
According to the minister, the BAAC is expected to pay an average of 4 billion baht per day.
It is hoped the partial payment will take the heat off the government which needs about 130 billion baht to pay the more than 1 million farmers participating in the scheme.
Mr Niwatthamrong said the government has tens of billions of baht to pay off the debts. The sources of the fund come from loans and sales of rice stocks.
‘’Every branch of BAAC will pay on the basis of first-come-first-serve,” Mr Niwatthamrong said. “Those who pledged the rice first will be paid first. BAAC can pay an average of 4 billion baht per day.
‘‘So there is no need for farmers to come to Bangkok to protest. The money will be transferred to their accounts with the BAAC.’’
About the author
- Writer: Terry Fredrickson
Position: Education Marketing and Support Manager