The Finance Ministry looks set to propose a draft bill on supervision of non-bank financial institutions to the cabinet, a measure meant to provide financial consumer protection, says a source familiar with the matter.
The bill has already passed the public hearing process, during which no participants disagreed with the principles and reasons behind the bill, the source said.
The bill is aimed at regulating non-bank firms that provide unregulated financial services, including operators of auto refinancing, hire purchase, leasing and factoring.
"To supervise financial service providers systematically and more efficiently, protect financial service users and enhance development of the country's financial infrastructure, it's suitable to have oversight that meets standards," according to the Finance Ministry's paper from the public hearing.
Under the law, an autonomous body will be set up to regulate non-bank financial institutions that are not supervised by the central bank, as a way to protect consumers.
At present, the central bank supervises banks and non-bank financial institutions that are bank subsidiaries.
Pornchai Thiraveja, an adviser to the Fiscal Policy Office, said recently that the autonomous body would enforce compliance under law, preventing violations such as charging higher interest rates than allowed by law.
"As these businesses [non-bank institutions] operate without the standard framework, many people still lack the ability to compare and select lending products and are likely to be taken advantage of in many ways, such as entering into contracts with unfair conditions and being charged interest and fees at inappropriate rates," the paper said. "Therefore, the draft bill requires the formation of a supervisory unit."
The autonomous committee will be tasked with issuing rules and regulations, laying down guidelines for oversight to promote and develop businesses, registering non-bank service providers, and setting fees, the paper said.
Initially, the autonomous body will be responsible for supervising non-bank financial service providers, which include lenders for auto refinancing, pico-finance and similar services such as factoring and leasing.
The government has formulated pico-finance to widen formal financing sources for low-income earners and informal workers, helping them avoid underground lending and encouraging loan sharks to enter the formal lending system.
The Finance Ministry's criteria require pico-finance operators to have minimum registered capital of 5 million baht and confine their operations to a particular province.
They are permitted to lend for general purposes and are limited to loans of 50,000 baht per borrower at a maximum interest rate of 36% a year.