The Small and Medium Enterprise Development Bank of Thailand (SME Bank) plans to reduce its non-performing loans to 25 per cent this year, from the current 41 per cent, or Bt19 billion, Finance Ministry spokesman Somchai Sujjapongse said yesterday.

The NPL levels of the SME Bank is the highest among state-owned specialised financial institutions.

He said the bank's NPLs were down from Bt20 billion, or 43 per cent of total loans, at the end of last November.

The bank will reduce bad loans by debt restructuring and improving the quality of new loans. Somchai, who is also chairman of the SME Bank, said the bank would make the credit process more efficient and also reduce costs by using the call banking system equipped with a new information-technology solution.

"The bank will review the lending process and improve debt-collection," Somchai said. "In cases where our customers are unable to sell their products, we would help them set up special occasional markets. Our officials would also provide suggestions to them. The debt follow-up result will be reported to the board on a monthly basis."

He said the SME Bank planned to cut its staff numbers by 400, in order to make the bank's operations more flexible. Somchai said the bank would also prune the number of its advisers, currently at more than 20, as a cost-cutting measure.

Somchai said the probe into seven corruption cases involving the bank's past credit practices had been completed and submitted to the bank's board. Twenty other cases are still being probed.

Meanwhile, Somchai said newly appointed Finance Minister Chalongphob Sussangkarn had told the management of all specialised financial institutions to boost lending, due to an apparent slow-down in new lending by these state-owned financial agencies.

Earlier, due to the high level of bad loans, the Finance Ministry would have had to pump an additional Bt30 billion into five specialised financial institutions, in order to enable them to expand their business over the next five years. The SME Bank has asked the ministry for Bt2.7 billion in new capital, to cover the bank's business expansion over the next two or three years. However, the Fiscal Policy Office may not approve the bank's requisitioned figure.