GSB weighs lowering rates

GSB weighs lowering rates

The state-owned Government Savings Bank (GSB) will hold an executive board meeting next Tuesday to consider whether it will pass on the central bank's 25-basis-point rate cut.

The three main factors of financial liquidity, market competition and financial cost will guide the decision-making, said GSB president and chief executive Chatchai Payuhanaveechai. 

GSB's loan-to-deposit ratio stands at 90%, so the remaining 10%, amounting to roughly 200 billion baht, is liquidity surplus, Mr Chatchai said.

The liquidity of the overall banking sector is quite high at 3-4 trillion baht.

"The policy rate has not been a benchmark rate for market rates for a while," Mr Chatchai said. "Banks would prefer adjusting the premium on lending rates to prime rates."

As for the industry's deposit rate, it had been raised for special savings accounts before the Bank of Thailand's rate cut last week, so financial costs have increased.

The central bank surprised the market by following the lead of its major counterparts with a 25-basis-point rate cut, the first decrease since 2015, in an effort to boost the economy.

The Monetary Policy Committee voted 5-2 to cut the benchmark rate from 1.75% to 1.50%, reversing the rate-setting panel's rate hike last December.

Specialised financial institutions will hold a meeting soon to discuss the issue. GH Bank, the state-owned mortgage lender, is expected to spearhead the rate lowering this round, a source familiar with the matter has said.

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