The Thai Bankers’ Association (TBA) has signalled that its members would hold prime interest rates steady, in line with the Bank of Thailand’s policy rate, as the US Federal Reserve plans to start cutting rates next year.
The Bank of Thailand left its policy rate unchanged at 2.50% last month, pausing its tightening campaign for the first time this year.
“Under this scenario, banks would maintain interest rates based on the Bank of Thailand’s policy rate and global trends,” TBA chairman Payong Srivanich said on Wednesday after a meeting of the Joint Standing Committee on Commerce, Industry and Banking.
Given market expectations of Fed rate cuts in the coming quarters, money markets and foreign capital flows worldwide have been affected.
For the Thai market, the Fed’s policy direction has caused significant volatility in the baht against the US dollar, he said.
Banks raised their interest rates four consecutive times following the Bank of Thailand’s recent policy rate hikes.
The central bank’s Monetary Policy Committee raised its policy rate for seven consecutive meetings by 25 basis points per meeting, from 0.5% in August 2022 to 2.5% at present.
Mr Payong said the period of low interest rates has ended, but banks would continue to help vulnerable customers with debt restructuring amid swelling household debt and rising non-performing loans (NPLs).
The TBA is ready to collaborate with the government to solve the egregious loan shark problem.
Moreover, the TBA has cooperated with the Bank of Thailand to reduce burgeoning household debt.
“However, information on formal and informal loans is scattered; therefore the authorities should centralise the database to simplify the debt management,” he said.
The Ministry of Interior so far has registered 37,579 people seeking government help to pay off debts exceeding 1.5 billion baht to loan sharks.
NPLs in the banking sector increased from 2.68% of total outstanding loans in the first quarter of 2023 to 2.79% in the third quarter.
Special mention (SM) loans, defined as loans overdue from 30 to 90 days, have continued to increase, representing around 15% of the total loan portfolio of the banking sector.
Rising SM loans are mainly attributed to retail, and small and medium-sized enterprise loans, Mr Payong said.
According to the central bank, the country’s household debt amounted to 16 trillion baht, representing 90.7% of GDP.