BAAC cuts loan target as state farm aid soars

BAAC cuts loan target as state farm aid soars

Growth still expected despite tepid demand

BAAC workers in Lop Buri pay out subsidies to farmers. THITI WANNAMONTHA
BAAC workers in Lop Buri pay out subsidies to farmers. THITI WANNAMONTHA

The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) has sharply cut its new-loan target for this financial year to 250 billion baht from 750 billion baht earlier in anticipation of declining loan demand after the government approved in principle the extension of debt repayment and lower lending rates for small-scale farmers.

The bank's farm customers will have no need to secure new revolving loans after the government's aid measures are rolled out, said BAAC president Apirom Sukprasert.

The BAAC's financial year runs from April 1 to March 31.

The bank's loans, worth 550 billion baht and an additional 200 billion baht in interest, are normally due to be repaid every year, and the state-backed farm bank will not receive the amount if all its farm debtors join the government's debt repayment extension scheme, Mr Apirom said.

Even if the BAAC does not receive the 750 billion baht in repayments, the bank's financial liquidity will not be tighter, he said, citing the smaller number of borrowers.

The cabinet at the end of last month gave approval to financial assistance measures for farmers to help shore up the agricultural sector.

In the first of the two measures, the government could cut lending rates for one year to small-scale farmers between Aug 1 this year to July 31, 2019, covering only the first 300,000 baht in lending.

The state will subsidise 2.5% of the interest rate annually, while the BAAC will shoulder 0.5% a year.

The subsidy programme is estimated to cost about 16.3 billion baht, 2.71 billion of which will be allocated from the fiscal 2018 budget for the first two months (Aug 1-Sept 31) of this year. The remaining 13.6 billion baht for the last 10 months will be from the fiscal 2019 budget.

Small farmers are required to pay normal interest rates for loans that exceed 300,000 baht.

In the other measure, 3.81 million BAAC borrowers will be allowed to reschedule their debt repayment for three years from Aug 1, 2018 to July 31, 2021. Farmers who want to take part in the project are required to submit applications to the BAAC by Dec 31, 2018.

Participating farmers are required to repay interest at least once a year.

Despite the government's aid measures, the BAAC still aims to raise its outstanding loans by 7% or 93 billion baht this financial year, Mr Apirom said.

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