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Published on February 22, 2008

Earlier, SME Bank president Pongsak Chewcharat proposed that the board approve a Bt10-billion capital fund, but the board considered it should be reduced to only Bt3 billion. It is suffering from non-performing loans of about 40 per cent of its overall lending.

"It is difficult to get approval from the government, as it needs to set aside the budget for other projects," said Industry Ministry permanent secretary Chakramon Phasukvanich.

He said the SME Bank had asked the former government to increase the capital fund by Bt2.7 billion last year, but only Bt1.2 billion was approved.

"We planned to ask the government to put Bt1.5 billion more into our capital fund in the middle of this year, but we have to increase this to Bt3 billion if the government wants us to grant Bt30 billion worth of loans to grass-roots communities within three years," he added.

It will propose the higher capital increase to the Finance Ministry early next month. Chakramon said the interest rate on the loans was expected to be 3 percentage points lower than normal rates, provided the government agreed to compensate the bank for the difference.

"If the government does not support the lower interest, we will probably provide loans at the normal or a slightly lower interest rate," he said.

Due to its low financial liquidity, some of the Bt30-billion in loans may come from domestic financial sources.

Chakramon said the SME Bank planned to cut its non-performing loans from to 20 per cent.

A source from the bank said it would probably restructure the internal organisation soon because its operating expenses are much higher than at other banks.

"In the overall evaluation, we have too many high-ranking executives who do not really earn their salary," he said. "Therefore, we might have an early-retirement programme to reduce these costs."

The Nation