Big rate cut unlikely

"If we know of any customer getting a debtpayment problem, we'll talk to them," Khan Prachuabmoh, president GH Bank, said yesterday.

"We must ask how much they can pay in monthly instalments, then we'll do debtrestructuring to fit their income. What the bank should not do is force them to pay instalments that the bank wants [but the borrower can't afford] because the debt will become a nonperforming loan (NPL)," he said.

Because the debt payment ability of each customer is different, the bank could not state the exact interest rate reduction, he said.

The measure would be proposed to the GH Bank's board and must be completed by this year-end, he said.

The central bank's Monetary Policy Committee is scheduled to meet on December 3 to review its policy rate.

Khan believes the central bank would lower its policy rate, but commercial banks might not follow with a rate reduction.

Banks have been competing to mobilise liquidity by offering high returns on deposit products. With the high cost of funds, the lending rate in the market might not go down much.

Chatchai Payuhanaveechai, senior vice president of Kasikornbank, said the policy rate might be adjusted by 0.25 to 0.50 percentage point because of pressure from the current economic situation.

Credit interest rates in Thailand partly depend on deposit interest rates.

The loantodeposit ratio has risen to 105 per cent, so if banks still needed deposits, loan interest rates would not be decreased.

"Next year, the competition in housing loans will be more intense because it's low risk lending. Due to the global financial crisis, lending to corporations exposes more risk, so banks may move to compete in home loans instead. Besides, the home loan market will grow as much as this year because the government may extend the stimulus measures for the property sector," he said.

If any customers had trouble servicing their debt, they should talk to banks for help such as cutting the instalment amount for one to two years, because if their payment didn't cover the interest rate, the debt would become an NPL, he said.

Kasikornbank's mortgage loans are so far up 15 per cent year on year and are expected to grow 20 per cent by year-end.

Kasikornbank's research centre expects that the overall home loan market will grow 8.2 per cent compared to 9.4 per cent last year.

GH Bank's home loan portfolio is expected to expand by Bt7.7 billionBt8 billion a month till the end of the year.

Separately, Krirk Vanikkul, assistant governor of the Bank of Thailand, said HSBC's lifting of minimum salary requirements for credit card applicants would ensure that the debt repayment ability of cardholders would increase. It would also help slow down creditcard lending.

The central bank did not have any information on whether the loan shark business would escalate amid the current economic situation. But lowincome earners without access to legal sources of funds would usually wind up tapping illegal sources instead to fulfil their demand for money, he added.