TCG asked to raise guarantee ceiling

TCG asked to raise guarantee ceiling

SMEs lack access to BoT soft loans

The merged TMB-Thanachart Bank set up a debt advisory and debt restructuring unit to help customers.
The merged TMB-Thanachart Bank set up a debt advisory and debt restructuring unit to help customers.

Business leaders have requested state-owned Thai Credit Guarantee Corporation (TCG) raise the maximum loan guarantee to 50% to allow small firms to better access financial sources under the Bank of Thailand's 500-billion-baht soft loan scheme.

Supant Mongkolsuthree, chairman of the Federation of Thai Industries, said the private sector will propose the central bank expands the maximum loan guarantee from 30% to 50%.

The expansion would help lower banks' credit risk and encourage financial institutions to offer loans to small and medium-sized enterprises (SMEs) to sustain liquidity amid the pandemic, said Mr Supant.

Payong Srivanich, chairman of the Thai Bankers Association, said the group will hold a meeting to discuss the issue, then inform the central bank of its position.

The central bank is offering 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 at the end of last year.

Piti Tantakasem, chief executive at TMB-Thanachart Bank, said increasing the TCG's maximum loan guarantee to 50% should help SMEs access bank loans.

Only 5% of the bank's SME customers cannot access the central bank's soft loans under existing conditions, mainly because of fragile debt-servicing ability, said Mr Piti.

Some 70% of SME clients can access the soft loans, but most of them have no demand because of sufficient liquidity based on good earnings and strong business potential, he said.

A portion of the bank's retail loan customers that took advantage of debt relief measures have shown signs of improvement for debt repayment, particularly in the auto loan segment.

Around 90% of auto loan borrowers have returned to servicing their debts normally, said Mr Piti.

The bank will continue monitoring the situation until year-end amid a spate of uncertainties and will maintain a strong capital buffer on bad debt provisions to safeguard against higher non-performing loans (NPLs), he said.

The bank's gross NPL ratio is 2.4%.

The target is to control distressed loans at no more than 3% by the end of 2020.

Jaturong Jantarangs, assistant governor of supervision group 1 at the Bank of Thailand, said a large portion of retail borrowers will exit the central bank's debt relief measures for the second phase when the policy expires at the end of October.

As of July 31, borrowers received debt relief measures totalling 7.2 trillion baht in value from 12.5 million accounts.

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