Siam Commercial Bank (SCB) has widened the ceiling rate on commercial loans to small business operators to 28% in a move to prepare for expanding to digital lending.
The bank's new maximum rate for small business loans applies only to borrowers who have partial or no collateral, SCB said.
The new rate took effect from Jan 16.
The bank lifted the premium rate charged on top of the minimum retail rate to 20.63% for both overdraft facility and general loans, which in turn widened their ceiling rate for normal loans and late payments to 28% per year.
The premium rate for overdraft and general loans was 12% earlier, while late payments stood at 15%.
Arak Sutivong, SCB's senior executive vice-president, chief financial officer and chief strategic officer, said the new ceiling rate for unsecured commercial loans helps prepare for digital loans aimed at small businesses and self-employed clients with lower credit lines.
He said this market segment carries a higher credit risk, therefore the bank must increase the ceiling rate in line with risk profile.
"The higher ceiling rate is part of the bank's business strategy and has nothing to do with financial cost, nor does it signal the prime lending rate will increase," Mr Arak said.
SCB, the country's second-largest lender by assets, earlier this month spearheaded a hike of fixed deposit rates by 25 basis points for three-, six-, 12-, 24- and 36-month maturities, but kept prime lending rates, the minimum lending rate and the minimum overdraft rate unchanged.
The fixed deposit rate increase came after the central bank raised its policy rate by a quarter-point to 1.75% in December, the first hike in more than seven years.
Arthid Nanthawithaya, president and chief executive of SCB, said the bank is mainly focused on offering reasonable prices for all loan products, which can contribute to suitable profitability and productivity.
Profitability and interest income are not generated solely from the loan portfolio, he said.
Some of the bank's peers have lower loan portfolios than SCB, but they manage to generate a better margin and interest income, Mr Arthid said, therefore the bank wants to improve financial cost management based on suitable pricing.
"We aim to maintain a suitable margin and profit rather than join a price war," he said.