The Thai Bankers' Association (TBA) is in talks with the Bank of Thailand to seek ways to fine-tune the 500-billion-baht soft loan criteria, probably by allowing banks to extend loans with a specific purpose such as keeping small and medium-sized enterprises' (SMEs) employees on payroll.
The goal is to increase the soft loan disbursement, said Predee Daochai, chairman of the TBA, as the tough loan conditions under the executive decree are a drag.
Offering soft loans with specific objectives and easing some conditions should boost SME liquidity amid the pandemic, he said.
"The solutions haven't been finalised yet and require further discussion with the central bank. Both the regulator and banks want SMEs to have better access to the soft loan scheme to help them overcome this difficult situation," said Mr Predee.
The soft loan scheme has extended only 90.5 billion baht to 567,312 SMEs as of June 22. Of the total SMEs, 43,030 or 76.4% are small SMEs with credit lines below 20 million baht, 9,825 are mid-sized SMEs with credit lines of 20-100 million, and the remainder are large SMEs with credit lines of 100-500 million.
The central bank is offering the 500 billion baht in soft loans at 0.01% interest to financial institutions for two years to re-lend to SMEs with a maximum credit line of 500 million baht at 2% interest. The government will absorb interest charges for six months for SMEs that receive soft loans.
To be eligible, SMEs must operate domestically, be non-listed companies, have a credit line of up to 500 million baht from financial institutions and continue to service debt or make late payments of less than 90 days as of the end of last year.
The maximum drawdown for the soft loans is set at 20% of each bank's outstanding loans at the end of December.
The government will partly compensate financial institutions for losses that are incurred.
In a related development, banks have provided financial assistance under the central bank's debt relief measures to 16.4 million customers with combined loans of 6.84 trillion baht as of June 15.
Of the total, 15.2 million customers or 93% are retail borrowers, 1.14 million or 6.97% are SMEs and 5,028 or 0.03% are corporate clients.
Mr Predee said banks are ready to comply with the second phase of the central bank's debt relief measures to help virus-hit customers, but it is too early to predict the number of participants.
The central bank's debt relief packages help banks keep a lid on non-performing loans, he said.
However, the local banking industry has adequate buffers to cope with the economic downturn, said Mr Predee.
Even a bank with the lowest BIS capital base among industry peers at 11% is well above the central bank's 8.5% minimum requirement, he said.
According to TBA data, commercial banks' capital adequacy ratio was 18.9% at the end of April, far above the central bank's flood requirement and Basel Committee on Banking Supervision Standard at 10.5%.
Banks' tier-one capital was 15.8% and tier-two capital was at 15.8%.
The Joint Standing Committee on Commerce, Industry, and Banking lowered the country's economic contraction forecast on Wednesday to 5-8% for 2020 from 3-5% projected previously.
The business group also cut its forecast for Thai export contraction from a band of 5-10% previously to 7-10%.