Savings rates by locals at Thai and foreign commercial banks have more than doubled over the course of the pandemic, new data has revealed, with large depositors contributing the overwhelming majority of additional money.
However, the lowering of deposit protection to a maximum of 1 million baht this month is unlikely to impact large depositors, according to economists.
As of May this year, total outstanding deposits in the commercial banking sector had increased by 1.78 trillion baht from February last year, before the pandemic hit, said Wachirawat Banchuen, senior economist at Economic Intelligence Center (EIC), a research house under Siam Commercial Bank (SCB).
Following the outbreak of Covid-19 in Thailand, between March 2020 and May 2021, the total deposit portfolio grew by an average year-on-year rate of 8.7% per month, compared with an average of 3.9% monthly growth during the years 2015-2019, Mr Wachirawat said.
Of the 1.78 trillion baht rise in deposits, a total of 91%, or 1.6 trillion baht, was contributed by large depositors who had deposits larger than 1 million baht per account. But large depositors represent only 1.6% of the total deposit accounts of the overall commercial banking industry, he said.
At the same time, small-ticket deposits of less than 100,000 baht per account represent 27 billion baht in total, or 1.56% of total outstanding deposits. However, in terms of account numbers, small depositors represent 91.22% of all deposit accounts.
Mr Wachirawat said that higher deposits in Thailand were in line with global trends, because of careful spending by consumers and a desire for savings in case of emergency, while businesses have also maintained their liquidity in case of unexpected situations.
The government's measures to contain new infections have been hitting private consumption. In addition, the government's subsidy measures have partially supported the incomes of both households and businesses.
Mr Wachirawat said while individuals with deposits above 1 million baht per account saw their savings increase during the pandemic, small depositors saw their deposits decrease, especially after the government's cash handout schemes ended. As a result, Covid-19 has been affecting lower income earners significantly and led to them withdrawing deposits for daily spending.
EIC expects the country's total deposit portfolio to further increase in the second half of 2021, chiefly because of contributions from large depositors, in line with consumers' changed spending habits and precautionary saving.
Meanwhile, according to Thailand's Deposit Protection Act, deposit protection will be lowered to a maximum of 1 million baht per account per financial institution from Aug 11 this year from the current maximum of 5 million baht.
The cabinet's meeting on 7 April 2020 approved a one-year extension of deposit protection up to a maximum of 5 million baht until 10 August 2021. From 11 August 2021, the protection will cover deposits up to 1 million baht.
Songpol Chevapanyaroj, president of the Deposit Protection Agency (DPA), said in a statement that maximum deposit protection of 1 million baht covers 82.07 million depositors, or 98.03% of total depositors, of 35 financial institutions under the Act.
As of May this year, there were 83.72 million depositors at the 35 financial institutions, increasing by around 1.34 million, or 1.62%, from the end of last year. The new depositors are largely individuals with deposits of no more than 1 million baht.
Meanwhile, the total value of protected deposits was 15.28 trillion baht, rising by 347.94 billion baht, or 2.33%, from the end of last year.
Kasikorn Research Center (K-Research) said this deposit protection change would not impact large numbers of depositors, while financial institutions still had solid financial foundations to ensure depositor confidence.
Local and foreign commercial banks registered with the Bank of Thailand (BoT) have a high average capital adequacy ratio at 20.21%, greater than its requirement of 12%. Their liquidity coverage ratio is also high at 195.14%, and greater than the BoT's requirement of 100%.