As many major economies are entering into recession, worst in almost 100 years, amid the rising global liquidity crunch, Thailand's government and central bank -- Bank of Thailand (BOT) have agreed to seek cooperation from domestic commercial banks to ease credit for the private sector while to ask state banks to guarantee loans for commercial banks.
"Interest is not the push factor for commercial banks to release loans, but the major issue is related to risk," Bangkok Post's website on Tuesday quoted Prime Minister Abhisit Vejjajiva as telling reporters after a meeting with the central bank's executives on Monday.
Amid the current economic circumstance, it is normal that commercial banks are reluctant to loan as they are worried of non-performing loans (NPLs) problems which can adversely affect their financial strength, Tarisa Watanagase, the BOT governor said, according to another report on the website of Krungthep Turakij, a Thai-language newspaper.
"Crucially, there must be loan guarantees...," the report quoted the BOT governor as saying.
Meanwhile, Apisak Tantivorawong, chairman of the Thai Bankers Association said that bank loans could expand by 5 percent from the base of 6 trillion baht (171.4 billion U.S. dollars), if the country's gross domestic product (GDP) grows by 0-2 percent this year, Bangkok Post's website reported.
"Some banks have concerns over potential NPLs so they have become stricter about approving loans," said Apisak.
The BOT forecasts that this year Thailand's economy will expand in a range of 0.5-2.5 percent, while during the next meeting of the Monetary Policy Committee on January 14, the Committee will review the country's economic situation, Tarisa said.
Prime Minister Abhisit hopefully said that the country's benchmark interest rate will be lowered during this forthcoming meeting of the Monetary Policy Committee.
Source:Xinhua
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