Tepid initial response to soft loan scheme

Tepid initial response to soft loan scheme

Fresh wave prompts pause for reflection

Loans for SMEs are offered at an expo. (Photo: Somchai Poomlard)
Loans for SMEs are offered at an expo. (Photo: Somchai Poomlard)

Commercial banks have been slow to draw down soft loans under the Bank of Thailand's latest scheme because of the third wave of the pandemic.

An executive source who requested anonymity said his bank has been working with small and medium-sized enterprises (SMEs) to support additional credit lines under the amended soft loan programme, which was implemented on April 26.

The bank needs to consider the purposes of the loans and the business situations of customers more carefully following the latest wave of infections, the source said.

According to the central bank's amended soft loan programme, it supports the liquidity of both corporates and SMEs in preparation for the country's reopening and business recovery. However, a broader recovery could be delayed because of the third wave and a slow vaccine rollout.

The source said his bank previously planned to offer additional credit lines to hoteliers for maintenance and renovation to prepare for reopening sometime in the second half of the year. But this plan is expected to be postponed, which could result in more uncertainty for the economy.

Previously, both the central bank and financial institutions estimated soft loan withdrawals would be limited in the first week of programme implementation, before increasing in the second and third week.

"Now the bank expects soft loan withdrawals [for the whole banking sector] to be sluggish this month, possibly picking up in June," said the source.

As of April 26, the central bank announced approval for soft loans with a value of 507 million baht for 379 commercial loan borrowers, accounting for a credit line of around 13 million baht per borrower.

Of this total credit line of 507 million baht, 59.7% was granted to SMEs or those with a credit line with existing creditors of 5-50 million baht. Another 27.4% was granted to micro-SMEs with credit lines of 5 million baht or less per client, while 12.8% was granted to corporations with credit lines of 50-500 million.

On March 23, the cabinet approved financial relief measures worth 350 billion baht to help business operators recover from Covid-19.

The steps included 250 billion baht in soft loans provided by the central bank and 100 billion for asset warehousing to assist debtors who are unable to repay loans.

Bangkok Bank director and senior executive vice-president Suvarn Thansathit said the pandemic would widely affect the economy and local business operations.

The bank forecasts some sectors will need several years to return to normal and is ready to provide customers assistance via both the soft loan and asset warehousing schemes.

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5 Jun 2023