More regulation of non-bank financial sector mulled

More regulation of non-bank financial sector mulled

The Finance Ministry wants to set up an autonomous body to regulate non-bank financial institutions that are not supervised by the central bank to protect consumers, says Pornchai Thiraveja, an adviser to the Fiscal Policy Office (FPO).

The FPO is drafting a bill to oversee non-bank financial institutions that engage in leasing, factoring, picofinance and nanofinance, he said. There are several laws governing the issuance of operating licences for these financial institutions, but a regulator for their functions remains unappointed.

The autonomous body would enforce compliance with laws such as refraining from charging a higher interest rate than allowed by law, said Mr Pornchai.

At present, the central bank supervises banks and non-bank financial institutions that are bank subsidiaries.

The Finance Ministry said last week it has granted picofinance licences to 279 juristic entities in 60 provinces across the country, 159 of which have already begun operations. The government has introduced nanofinance and picofinance firms with the aim of addressing the loan shark problem.

Ministry criteria requires picofinance operators to have minimum registered capital of 5 million baht and confine their operations to a particular province. They are permitted to lend for general purposes and are limited to loans of 50,000 baht per borrower at a maximum interest rate of 36% a year.

Nanofinance operators can lend only for occupational purposes, with a lending limit of 100,000 baht per borrower and a ceiling interest rate of 36% a year, but they can provide lending services across the country. Nanofinance operators must have minimum registered capital of 50 million baht.

In the meantime, the Government Pension Fund (GPF) board has nominated Vitai Ratanakorn, acting president of state-owned Islamic Bank of Thailand (IBank), as the secretary-general at the country's largest pension fund, said permanent secretary for finance Somchai Sujjapongse.

The GPF is expected to propose his name to the finance minister for approval next month, he said.

Mr Vitai is a suitable person with vision in line with the GPF's policy, said Mr Somchai, adding he believes Mr Vitai will improve the pension fund's performance.

Mr Vitai had been tasked with turning around IBank, despite already being senior executive vice-president of the Government Savings Bank.

IBank has been saddled with a high proportion of bad loans, with its capital adequacy ratio plunging to 20%.


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