State-owned Government Savings Bank (GSB) plans to adjust its loan criteria to collateral-based lending from the current cashflow-based lending to assist people experiencing a liquidity crunch.
The adjustment process should take 1-2 years, said GSB president and chief executive Vitai Ratanakorn.
As Thailand's economy has been hugely affected by the continuing Covid-19 outbreak, the cashflow-based lending criteria for loan assessment is not applicable over the next 1-2 years because economic activities have been dampened by the pandemic crisis, said Mr Vitai.
Some businesses have had to stop operating temporarily, resulting in losses of income, he said.
Banks previously used the collateral-based lending criteria for loan assessment before adopting the cashflow-based lending criteria, said Mr Vitai.
If the GSB does not adopt the collateral-based lending criteria, the bank would not be able to provide loans, he said, creating an adverse effect that would harm the people more than the bank itself.
Loss of income and failure to obtain additional liquidity through lending could cause loans to turn into non-performing loans, said Mr Vitai.
GSB will start analysing loan assessment through the collateral-based lending approach for its auto hire-purchase loans.
Cars will be used as collateral assets.
The bank's annual interest rate for this loan product is capped at 18%, lower than the market rate of 24-28%.
He insisted GSB will not incur losses from its auto hire-purchase loans because the 18% interest rate is the highest among loan products offered by the bank.
Small and medium-sized enterprises can also use land as a collateral asset to obtain loans from GSB, Mr Vitai said.
The bank charges an annual interest rate of 5.99%, lower than the repurchase interest rate of 15-30%, he said.