Six major commercial banks and a handful of state-owned banks announced a reduction of lending interest rates following the Bank of Thailand's policy rate cut late last month to alleviate the financial burden for borrowers amid a weakening economy.
Domestic systemically important banks (D-SIBs) and some state-owned banks plan to trim loan interest rates across the board by 0.1-0.25 percentage points, aligning with the central bank's Monetary Policy Committee rate cut by a quarter-point to 2% on Feb 26.
The policy rate cut was attributed to a weaker economic outlook as the central bank slashed its GDP growth assessment for 2025 to slightly more than 2.5% from 2.9% previously.
All six D-SIBs cut their minimum overdraft rate (MOR) by 0.25 percentage points, while the minimum retail rate (MRR) and minimum lending rate (MLR) were trimmed by 0.1 percentage points. The rate cuts take effect this week.
With the adjustment, the MLR of these banks should be in a range of 6.825-7.5% a year, with MORs in a range of 7.02-7.35% and MRRs at 6.95-7.605%.
Thailand's six D-SIBs comprise Bangkok Bank, Krungthai Bank, Kasikornbank, Siam Commercial Bank, Krungsri (Bank of Ayudhya) and TMBThanachart Bank.
Meanwhile, Government Savings Bank (GSB) cut its MLR and MOR by 0.25 percentage points to 6.65% and 6.495%, respectively.
Government Housing Bank (GHB) also slashed its MOR by 0.25 percentage points to 6.15%, while its MLR is reduced by 0.1 percentage points to 6.15%. The cut is effective from March 5 to Aug 31.
However, GSB and GHB maintained their MRRs at 6.595% and 6.545%, respectively, given that their MRRs are the lowest among banks.
GSB president Vitai Ratanakorn said the reduction aims to stimulate business growth, aligning with economic conditions.
The Export-Import Bank of Thailand (Exim Bank) lowered its prime rate by 0.10 percentage points to 6.25%, effective from March 10, declaring it equivalent to the MRR of other banks.
The Bank for Agriculture and Agricultural Cooperatives reduced its MOR by 0.25 percentage points to 6.625% and cut its MRR by 0.15 percentage points to 6.725%. The reduction takes effect tomorrow.
Exim Bank president Rak Vorrakitpokatorn said the rate cut aims to enhance liquidity for local business operators amid the subdued economy and rising risks from new trading policies of the world's leading economies.
Kasikorn Research Center (K-Research) anticipated the banks' rate cuts would primarily benefit new loan contracts, while reducing the interest payments of existing borrowers.
Retail and business loans, representing 56.4% of the total loan portfolio of the local banking system, are the major beneficiaries, according to K-Research.
"The benefit will be realised around mid-year, lowering the interest burden of the two loan segments by 7.3-7.5 billion baht this year," according to the think tank.
The interest savings is equivalent to 1-1.2% of banks' net interest income, based on estimates for 2025 and assuming the rate cuts take effect this month.
The economic outlook is a primary factor contributing to loan growth, which means K-Research wants to monitor economic momentum the rest of this year to gauge the debt repayment capacity of borrowers.
The central bank's policy rate direction is another factor to monitor, noted the think tank.
K-Research maintained its loan growth projection for the banking industry at 0.6% this year, a slight recovery from a 0.4% contraction in 2024.