The Financial Institutions Development Fund (FIDF) now expects to pay off the debt incurred from bailing out troubled financial institutions during the 1997 financial crisis in less than 15 years, earlier than the 24 years previously scheduled.
Preyanuch Chuengprasert, a senior director of the FIDF's management department, said the fund's debt burden under its three-year management period had dropped to an outstanding amount of 998 billion baht from more than 1 trillion.
The central bank's net profits, the rescue fund's assets, dividend payments from banks in which the FIDF holds stakes and commercial banks' contribution of 0.46% of the deposit base are being used to pay off the debt.
The two main channels for debt repayment are dividends earned by the FIDF's stakes in certain companies and cash from FIDF assets generated from debtors, Ms Preyanuch said.
The FIDF is the main shareholder in state-owned Krungthai Bank (KTB), the country's largest lender by assets, with a 55.07% stake, and wholly owns Bangkok Commercial Asset Management (BAM).
The rescue fund is expected to realise a hefty profit after BAM goes public. The country's largest asset management company is currently in the process of seeking listing on the Stock Exchange of Thailand (SET).
Earlier, central bank governor Prasarn Trairatvorakul estimated the FIDF would be able to clear its debt within 24 years.
The low-interest-rate cycle has also helped to shorten the period.
The Yingluck Shinawatra government successfully transferred the 1.14 trillion baht in bailout debt from the 1997 financial crisis to the central bank, a move the government hailed as helping to bring down public debt significantly and widening fiscal space.
The FIDF, part of the Bank of Thailand with a separate legal entity, was established in 1985 as a channel to provide financial assistance to troubled financial institutions, containing financial damage and mitigating threats to the stability of the financial institution system.
It played a vital role in bailing out cash-strapped financial institutions amid the 1997 financial crisis.
That was in addition to its usual responsibilities guaranteeing full repayment to depositors and creditors of financial institutions to maintain public confidence and the stability of the financial institution system.
In a related development, Ms Preyanuch said the possibility of KTB shares owned by the FIDF being sold to a holding company to be set up in accordance with the policy of the State Enterprises Policy Commission or superboard would depend on the decision of the State Enterprise Policy Office.
The superboard plans to establish a holding firm to own stakes in all SET-listed state enterprises as part of the reform aimed at preventing politicians from taking advantage of state enterprises.