State-owned Thai Credit Guarantee Corporation (TCG) will propose front-loading bad loan coverage under the 200-billion-baht portfolio guarantee scheme (PGS) 9 to a range of 5-7% in the first year to encourage lenders to extend new loans to small and medium-sized enterprises (SMEs) amid the lingering pandemic.
The front-loading proposal for PGS9, of which details are being drafted, has been raised because of the unusual economic circumstances, said president Rak Vorrakitpokatorn. The cap for the overall non-performing loan (NPL) coverage ratio for the scheme remains unchanged at 30%.
Under the 10-year straight line credit guarantee, TCG takes responsibility for soured loans of up to 3% each year for loans guaranteed by PGS9.
He said 40 billion of the 60-billion-baht credit guarantee for SMEs has already been used and the remaining 20 billion is expected to be doled out by June.
The loan guarantee scheme enables entrepreneurs whose debt turned sour to access financial institutions' loans, as it covers up to 40% of loans that deteriorate to NPLs.
Given that demand for the scheme is strong, TCG plans to allocate some credit guarantee amount under PGS9 to SMEs to build up the sector.
The corporation wants to amend the scheme to cover applicants who have overdue debt and whose debts are classified as special mention loans, aimed at providing more coverage, Mr Rak said.
Around 15% of 3 million SMEs nationwide are expected to struggle in servicing debt because of the country's economic doldrums and the virus pandemic, he said.
TCG plans to keep a lid on NPL levels at 4%, said Mr Rak.
The state-controlled credit guarantor plans to divest 20 billion baht worth of NPLs, which have been defaulted for 28 years, he said.
To speed up the working process, TCG has increased its loans with credit guarantees to 1,400 cases a day from 350 in the past.
Mr Rak said around one-third of TCG's employees continue working at offices.
During January to May, TCG's approved credit guarantee amount jumped 103% over the same period last year to 58.1 billion baht, with 80,267 guarantee letters for loans.
Among those whose debt is guaranteed by TCG, 64,202 are new customers, up 216% over the same period last year.