Non-bank companies will now be allowed legally to provide loans with property assets as collateral, following a relaxation of the rules by the central bank.

The relaxation partly paves the way for finance companies and credit fonciers that did not apply for banking licences or were not permitted to upgrade to bank status to continue in business as credit companies.

Bank of Thailand (BOT) assistant governor Samart Buranawatanachoke said the remaining companies [from those that had not been upgraded or had not applied for banking upgrades] had informed the central bank they wanted to maintain their existence.

He said non-bank companies could do leasing, factoring or other activities and were not subject to BOT control, because they did not take deposits like financial institutions.

"We will not supervise them, because they are not involved with public savings," he said.

But Samart said permission was required for those wanting to run a personal-loan or credit-card business and added that many companies had expressed their interest in such activities and requested approval.

Relaxation to extend business activities would only be effective once the Financial Institution Business Act was implemented, he said.

Three institutions that were not approved for banking licences are Asia Credit Foncier, Unico Housing Credit Foncier and Finansa Credit, while Advance Finance and Sahaviriya Credit Foncier did not apply for a banking licence.

The new rules stipulate that the credit institutions must charge no more than 15-per-cent interest on lending and that they not be allowed to take deposits like financial institutions do. They are only allowed to conduct business with their own capital or with specific borrowings.

He said each finance company and credit foncier should provide the central bank with a clear business plan, including when they would hand back their original licences, and they should report to the BOT by the end of the year.

They should return their licences this year or next, but this could be extended on a case-by-case basis, he said.

Samart said most had already proposed their plans to the central bank but had been asked to readjust them.

"We have not fixed an exact deadline, but they must have clear plans of what they want to do and when they will give back the old licences. The BOT will allow them to roll over existing promissory notes, but they cannot issue new ones," said the assistant governor.

The BOT must gather additional information from Thai Keha Credit Foncier before it can be upgraded to a bank, after the Finance Ministry rejected the central bank's recommendation to upgrade it.

Samart said that was the reason the approval process had been extended six months to the end of the year. The central bank has also collected data about AIG Finance, after it extended the deadline for the firm to upgrade to a bank.

Anoma Srisukkasem

The Nation