New DPA Act seen as an inducement to spread investment risk

Small banks are offering high¬er returns on shortterm deposits in a bid to maintain their customer bases as depositors are expected to spread their invest¬ments to reduce risk since the Deposit Protection Agency (DPA) Act came into effect.

Bigger banks had been leading the market for attracting deposits.

Now the Act has come into effect, the government's guarantee on all deposits held by commercial banks will gradually be reduced to Bt1 million per person per bank over the next five years.

For a year after the implemen¬tation of the Act, the blanket guar¬antee on deposits will still be effec¬tive but will be reduced to Bt100 million, Bt50 million, Bt10 million and Bt1 million over the next four years.

The reduction in the guarantee has prompted speculation that depositors will shift their money to larger banks, seeing them as safer havens for their cash.

Although the DPA came into effect on August 11, all bank deposits are still guaranteed for another 12 months, but banks have already responded to the new law by raising returns to maintain their depositor base.

Som Pisarnsopon, head of the finance and strategy division at ACL Bank, said small and medi¬umsized banks usually offered higher returns than bigger bank but lately the major banks had led the market by increasing their rates of return.

Small banks have been forced to adjust their deposit rates even though they considered they were already high enough.

"I think deposit rates are already high in the current market situa¬tion, but when the big banks raised their rates, smaller ones like us had to follow suit just to stay compet¬itive," Som said.

Most banks are offering 3.85 per cent return on bills of exchange (B/Es) on a threemonth fixed term, with a minimum deposit of Bt1 million required.

Thai Credit Retail Bank, another small bank, is offering 3.99 per cent on fivemonth fixed deposits, requiring a deposit of Bt100,000 to Bt10 million. This offer runs until September 8.

Land and House Bank, in the same category but specialising in mortgages, is offering 3.8 per cent on fourmonth fixed deposits until September 15. A minimum deposit of Bt100,000 is required.

Thanachart Bank offers the best return among small banks, but there are strings attached.

The offer is only for cus¬tomers who open a deposit account at one of its new branches within 15 days of its opening.

To open a threemonth fixedterm account Thanachart requires a deposit of Bt100,000 to Bt5 million, which offers an annual 5 per cent rate of return. In addition, customers have to open a savings account with Bt5,000 and apply for an ATM card.

The most recently opened branches are in Chiang Mai and on Asoke Road in Bangkok, which opened on August 8 and August 11 respectively. Another 10 branches are to be opened between August 22 and 29, are on Sukhumwit 47, Pahurat, Bang Buatong, Ladprao 101, Paknam, Pattanakarn Road, Buddhamonton Sai4, Lotus Chaiyaphum branch, Lotus Mahachai branch and Pattaloong Province branch, will be opened between August 22 to 29.

Thanachart is also offering a sixmonth fixedterm deposit account giving a return of 3.875 per cent until August 18, the min¬imum deposit being Bt50,000.

Kiatnakin Bank requires a min¬imum deposit of Bt2 million to open a fivemonth fixedterm account offering a return of 3.875 per cent.

Tisco Bank is offering B/Es car¬rying a 4percent return, which is paid on a monthly basis. Customers can buy them for fixed terms of four, six, nine or 12 months. A deposit of Bt500,000 to Bt1 million is required.

United Overseas Bank (Thai) offers a 3.8percent return on three, four, five and sixmonth fixed deposits. A minimum deposit Bt100,000 is required and a min¬imum of Bt5,000 for further deposits. Only the fivemonth fixed deposit offers a 4.2percent rate of return. These promotions are available until August 22.

Large banks such as Bangkok Bank and Siam City Bank offer a 3.8percent return on fivemonth fixed deposits while Siam Commercial Bank is offering 3.8 per cent on fourmonth fixed deposits. Bank of Ayudhya is offer¬ing 3.8 per cent and 4 per cent on fivemonth and 10months fixed deposits respectively. TMB Bank and Kasikornbank are offering 3.65 per cent on fivemonth fixed deposits.