The Government Savings Bank (GSB) will allocate a 1.5-billion-baht investment sum to purchase shares of a vehicle title loan company in a bid to lower loan interest in this loan segment through market forces.
The GSB's board of directors on Tuesday approved the bank's plan to operate a vehicle title loan business by entering into a joint venture with a subsidiary of an SET-listed company, said Vitai Ratanakorn, GSB's president and chief executive.
The bank will hold a 49% stake, valued at 1.5 billion baht, in the new vehicle title loan business, according to Mr Vitai.
The name of the company that the GSB is forming a joint venture with cannot be disclosed until the board of directors' grant approval, he said, adding that further details will be disclosed today.
The GSB has two main conditions for the joint venture.
The first condition is to reduce the car title loan interest rate to 18% per year.
The second condition is the company has to provide car and motorcycle title loans with a credit line of no more than 200,000 baht per borrower, said Mr Vitai.
He said the main objective of the GSB's foray into the vehicle title loan business is to help reduce the market interest for this loan segment from 24% to 18% per year.
The move is in line with the bank's strategy to become an integrated social bank, he said.
Previously, the GSB selected 24 potential partners from 44 companies operating the vehicle title loan business. Out of the 24 potential partners, eight of them submitted an offer to the bank.
The GSB then selected two companies and analysed their business potential before making the final decision.