The Bank of Thailand is revamping a series of regulations by applying information-based lending in a bid to help financial institutions and small businesses cut costs.
Most of the regulations are undergoing amendment. All regulations are expected to be completely rejigged by next March.
Under the plan, the central bank will encourage financial institutions to adopt information-based lending for SMEs by relaxing restrictions on credit lines for operator-owned SMEs, while easing regulations on debt-servicing ability for SMEs by allowing lenders to use alternative data in addition to income to give SMEs easier access to financial sources, said governor Veerathai Santiprabhob.
Lenders typically use a revenue-based lending approach.
The central bank will help SMEs use their National Credit Bureau credit scores to seek loans from financial institutions, he said, adding that SMEs and individuals will be able to use a single document of collateral value appraisal for loan applications from multiple lenders.
The permissions granted by the single document will enable SMEs and individuals to seek lending from another financial institution without needing repeated collateral appraisals if the appraisal is done within a specified period, while lenders will be able to evaluate collateral value without having to visit collateral sites.
Mr Veerathai said the central bank will revise the regulatory sandbox outline by permitting financial institutions to test common or standard infrastructure for financial products that are required by law for experiments.
For innovative products that will not require testing in the regulatory sandbox, the central bank will allow financial institutions to test out the products in their own sandboxes.
The new protocols will come into effect in January.
Financial institutions adopting technology that has a significant impact on business operations will be required to submit annual plans to the Bank of Thailand, provide progress updates on a quarterly basis and alert the central bank 15 days before the technology is launched.
With the relaxed regulations for financial institutions, at least 420 permission applications will no longer need to be submitted to the central bank. This will help financial institutions save costs associated with regulatory compliance by 1.1 billion baht a year, Mr Veerathai said.
After the changes, SMEs will be able to slash costs from collateral value appraisals by an estimated 500 million baht per year.
Mr Veerathai said weak exports and tourism were the main factors in the country's economic speed bump during the July-to-September quarter, while domestic consumption remained sound.
Thailand's economy grew by 3.3% year-on-year in the third quarter, easing from the second quarter's 4.6% and the first quarter's revised 4.9% growth -- the highest in five years.
For the first nine months, the economy grew by 4.3% year-on-year.