Published on October 18, 2005

The Government Savings Bank (GSB) expects to spend Bt1 billion to Bt2 billion refinancing individual debts under the government’s debt–relief plan.

That would address a significant portion of the Bt3 billion principal owed by individual debtors who are eligible to participate in the plan, said Goanpot Asvinvichit, GSB’s director-general.

According to an agreement between the government and banks, commercial banks will cut in half the principal on loans for eligible debtors with the requirement that they repay the debt within six months. Or the debtors can choose to refinance their debts with the GSB over a three-year period.

It is estimated that some Bt3 billion in principal on debts qualifies for the scheme.

Some people want to borrow from the GSB to refinance overdue debts owed to commercial banks, he said. The GSB would charge an interest rate of 13 per cent annually for a three-year contract. The rate would be the same charged under the People’s Bank programme. Each loan would cover Bt100,000.

He said he was not concerned about new defaults because the GSB has experience in “micro credit” under the People’s Bank scheme.

The GSB will also restructure about Bt100 million in debts

owed by its own clients, Goanpot said.

Finance Minister Thanong Bidaya is expected to submit a debt-restructuring plan to the Cabinet for final approval today. About 100,000 people, each with debts of no more than Bt200,000, are expected to benefit from the scheme.

Thanong reached an agreement with bankers last week on the package after they promised

to write off Bt20 billion in accumulated interest and forgive half of an estimated principal of Bt7 billion.

Prime Minister Thaksin Shinawatra and Thanong agreed that offering debt relief to individuals was necessary because they should receive the same treatment as private firms that suffered from the 1997 financial crisis. Nonetheless, some critics are concerned that the government’s move would encourage irresponsible financial habits.

In a related development, the GSB has launched a nationwide savings campaign. Goanpot said he was worried about the narrowing gap of saving and investment to 2.5 per cent of gross domestic product last year from about 9 per cent in 1998. The boom in investments since the crisis has decreased national gross savings rates.

He also said only 40 per cent of the people save their money. Most of them cannot save because they are overly optimistic about their future income, and hence they ignore financial prudence.

“We [GSB] maintain our traditional business of promoting savings, and we urge people to save a third of their earnings,” said Goanpot.

The GSB yesterday started offering Bt30 billion of its latest premium saving certificates. Also the bank is negotiating with the Government Housing Bank (GHB) to help support the GHB’s housing loans.

Wichit Chaitrong

The Nation

Post your comment to this story here