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Published on March 20, 2008

The Bank for Agriculture and Agricultural Cooperatives (BAAC) will seek Cabinet approval soon for a debt-suspension plan for farmers to reduce its non-performing loans and create new appropriate careers for them.

At the moment the bank has more than two million debtors, most of them farmers. Under the plan, BAAC targets 40 per cent of total debtors or 400,000 farmers to join in its debt suspension programme and the remainder would be considered for debt reduction.

The value of the debt under the targeted debt-suspension programme has reached Bt20 billion. The bank wants to have a financial subsidy from the government's budget of Bt1 billion-Bt1.5 billion each year throughout the three-year programme.

The strategy will pave the way for the bank to concentrate more on small and medium-sized debtors. They will also have the same assistance measures to encourage farmers to generate sustainable income.

BAAC president Thirapong Tangthirasunan said the bank would also seek Cabinet approval to reduce the interest rate to good debtors 1-3 per cent from the current rate. The bank's total good debtors number 1.4 million-1.5 million farmers.

 "We have to design new debt-restructuring criteria to facilitate debt suspension in order to find the right way to treat serious case farmers, otherwise we will face a rising number of debtors," Thirapong said.

 The bank's proposed debt-suspension programme is different from the one of the past five or six years. At the moment, commodity goods prices are high so farmers have higher income.

"Although farmers' payment ability is getting better due to increasing prices of farm crops, we have to manage business opportunities for them," he said, pointing out that the bank wants to reduce non-performing loans. "We will suggest that our customers undertake diversified businesses rather than continue farming if it's found they are losing competitiveness."

The bank will inspect its debtors' past payment performance for a few years as well as a survey of which crops they grow. Then the bank will propose an appropriate debt suspension programme to them. If they are found raising unprofitable crops, the bank will suggest that they phase out their farms.

The process is expected to take no more than six months. Farmers will have a three-year debt suspension. The bank should prepare some measures to assist them after the programme expires.  "We have to ensure that those debtors are able to pay their debts in the fourth year," Thirapong said.

In the past two years, BAAC's total deposits have increased by Bt200 billion (Bt100 billion each year), its working capital surged from Bt300 billion to Bt400 billion last year, and cash flow reached Bt570 billion. It is expected that its excess liquidity will reach Bt50 billion-Bt60 billion by the end of this year.

Achara Pongvutitham

The Nation