The cabinet yesterday approved an additional 10 billion baht in emergency loans to be channelled through the Government Savings Bank (GSB) as part of the second phase of the government's welfare and subsidy scheme.
The loans aim to tackle the long-standing problem of underground or unorganised lending to low-income earners.
Nathporn Chatusripitak, a spokesman for Deputy Prime Minister Somkid Jatusripitak, said low-income earners still need emergency loans to resolve their underground debt problems.
The lending plan entails a flat rate of 0.85% a month for a five-year term, with a cap of 50,000 baht per borrower.
The bank also requires either collateral or at least one person as loan guarantor.
The cabinet yesterday approved compensation of up to 4 billion baht in the event that the loans turn sour within the next six years.
The government expects the latest lending plan to let 200,000 low-income earners gain access to financial sources.
The cabinet last year permitted GSB and the Bank for Agriculture and Agricultural Cooperatives (BAAC) to extend a total of 10 billion baht in emergency loans to farmers and low-income earners in the first phase as part of efforts to tackle the loan shark problem.
The two banks were to lend 5 billion baht each to help small-scale farmers and low-income earners who had no access to loans from other banks to finance emergencies such as medical fees and tuition fees.
The move is meant to help 1 million debtors stay away from loan sharks and access formal financial sources.
Mr Nathporn said BAAC reported it has approved 4.985 billion baht in emergency loans to 119,516 low-income earners, while GSB has approved 4.921 billion baht to 104,128 low-income earners.
Only 0.41% of the loans extended by the two banks were found to be non-performing loans, showing good discipline among low-income earners, he said.
Earlier, the cabinet approved a spate of measures to tackle loan sharks, which included the nanofinance scheme, offering a lending maximum of 100,000 baht per borrower and a ceiling interest rate of 36% per year.
The cabinet also approved GSB loans of 200,000 baht to individuals.
The government has amended the Civil and Commercial Code to impose stricter punishments on those who give out loans without the Bank of Thailand's supervision and charge interest rates above 15% per year.