State eyes loan criteria to tamp down NPLs

State eyes loan criteria to tamp down NPLs

A woman walks past an ad board at GH Bank's headquarters promoting loans for the Pracha Rat low-cost housing project. SOMCHAI POOMLARD
A woman walks past an ad board at GH Bank's headquarters promoting loans for the Pracha Rat low-cost housing project. SOMCHAI POOMLARD

The Bank of Thailand has asked the Government Savings Bank (GSB), GH Bank and Krungthai Bank (KTB) to jointly set approval criteria for pre-financing loans for the government's low-cost housing scheme under the Pracha Rat (People's State) initiative to prevent loans turning sour in the future.

"The central bank wants the three banks to jointly set the lending criteria for property developers participating in the cheap-housing scheme because these banks don't have expertise in pre-financing for real estate projects," said GH Bank senior executive vice-president Chatchai Sirilai.

Under the scheme, the three banks will lend 10 billion baht each to project developers. The banks will charge 4% for the first two years, followed by the average minimum lending rate minus one percentage point throughout the remainder of the term.

Apart from the 30 billion baht in pre-financing, GH Bank and the GSB will lend another 20 billion baht each for mortgages to the low-cost housing scheme. Both banks will charge no interest for the first year, 2% for the second and third years, 5% for the fourth to sixth years and floating rates for the remainder.

With the special rate and relaxed debt-servicing limit, those who buy or lease homes priced 700,000 baht or less will pay a monthly rate of 3,000 baht for the first three years, 4,000 from the fourth to the sixth years and 4,500 for the remainder.

The scheme is aimed at helping eligible participants afford a 30-year lease or mortgage on a home. The affordable housing will be built by the Treasury Department and private sector. First-time buyers (including state officials) who are self-employed or otherwise earn a low or uncertain income will be eligible.

Mr Chatchai said the 30 billion baht in pre-financing loans would first be lent to development projects with no more than 200 units and investment of 200-300 million. The three banks will require developers to fund 70% of the project, with loans making up 30%.

GH Bank has frozen most project financing business since the 1997 financial malaise, only extending pre-financing loans to apartment developers where it can to conduct studies on rental demand, he said.

For the 40 billion baht in mortgages to the low-cost housing scheme, Mr Chatchai said eligible homebuyers have applied for 15 billion baht worth from March 23-25 at GH Bank and GSB. He said 8,000 applicants sought 6.7 billion baht in mortgages at GH Bank, with 300 seeking 280 million baht undergoing approval.

GH Bank estimates its allotment of mortgages will be approved in two months.

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