Liquidity in the domestic banking sector has been declining due to higher deposit withdrawals from business operators attempting to cope with the impact of the prolonged pandemic.
According to Kasikorn Research Center (K-Research), outstanding deposits at 19 registered commercial banks in the first quarter of 2021 in Thailand tallied 14.7 trillion baht, up 4.98% year-on-year.
However, the growth rate declined from 10.9% posted in the fourth quarter last year.
"Corporate deposits have been declining as business operators continue to rely on deposits to pay overhead, with their income down as a result of Covid-19," said Thanyalak Vacharachaisurapol, deputy managing director at K-Research.
On a quarter-on-quarter basis, total outstanding deposits increased by a marginal 0.47% or 68.5 billion baht, mainly helped by current account and savings account deposits.
However, fixed deposits have continued to drop in line with low interest rates.
Interest rates between short-term and long-term deposit accounts have narrowed, while better coupon rates for saving bonds have attracted depositors to debentures, according to the research house.
Amid sluggish loan growth, commercial banks are paying close attention to financial cost management and focusing more on rolling over expiring deposit accounts rather than offering new deposit campaigns, she said.
"For the second quarter this year, the deposit growth rate is expected to be on par with that in the first quarter or lower. Both individual and commercial savers will likely prefer keeping money in their deposit accounts as a safe haven," said Ms Thanyalak.
"More importantly, excess liquidity among business operators has continued to decline for the past several months because of the prolonged outbreak."
Given this scenario, K-Research forecasts deposits are unlikely to increase significantly in the second quarter this year, compared with the aggressive growth seen during the first round of the outbreak from March to May last year.
She said the banking sector's outstanding loans totalled 12.9 trillion baht in the first quarter of 2021, up slightly by 0.55% from the previous quarter.
The industry is expected to maintain loan growth at around the same level in the second quarter, mainly thanks to an additional credit line offered under the debt restructuring programme and the Bank of Thailand's soft loan scheme.