The move is in reaction to memorandums of understanding (MoUs) that banks were forced to sign to allow across-the-board debt haircuts for farmers, essentially cutting in half total loans owed to banks after the headquarters of major banks were besieged by hundreds of farmers last week.

Prasarn, Kasikornbank president, said banks were unhappy with the MoUs as they would suffer higher losses than from the initial MoUs they had agreed with the Network of Indebted Farmers in December last year.

On March 30, hundreds of members of the Network of Indebted Farmers demonstrated outside the head offices of Krung Thai Bank and Bangkok Bank, requesting more debt relief.

Under pressure from the protesters, the two banks signed additional MoUs extending haircuts agreed in the first agreements. As a result, other banks, including Kasikornbank, were later forced to sign similar agreements to avoid confrontations.

Kasikornbank expects to lose Bt100 million-Bt200 million as a result of forging the debt, Bangkok Bank expects a Bt200 million-Bt300 million loss, and Krung Thai Bank Bt600 million.

The first round of MoUs was signed last year after the government promised farmers that it would provided up to Bt10 billion to subsidise the haircuts for farmers who had outstanding loans from commercial banks.

But, debt-restructuring has been going slowly due to missing loan documents. This triggered the farmers' rally last week and the demands for higher debt relief.

Three sets of stakeholders were involved in establishing the scheme, the banks, the Network of Indebted Farmers and the Farmers' Rehabilitation and Development Fund.

Under the new agreement, all borrowers will only have to repay half of their loans and  interest charges are waived.

In contrast,under  last year's agreement debtors with loans of Bt1 million or less would be forgiven half the original principal and interest would be waived.

But, those who had borrowed between Bt1 million and Bt2.5 million were required repay 90 per cent of the principal, though interest charges were waived.

"All banks are concerned because these MoUs were made under duress and banks were coerced into signing," Prasarn said. "That behaviour [the bank sieges] was unacceptable."

He said that the prime minister, who is also the chairman of the Farmers' Rehabilitation and Development Fund, should have declared his disagreement with these actions.

Somruedi Banchongduang

The Nation