New law to widen collateral types

After the Cabinet meeting, Finance Minister Korn Chatikavanij said the commercial-collateral bill had been approved and would be forwarded to Parliament later. The bill was put forward by Korn to allow borrowers to use other types of assets as collateral for loans.

He said at present, debtors were allowed to use only a limited type of assets as collateral, which prevented people seeking loans from fully using all of their property. Usually, borrowers use their home, land or gold ornaments as collateral, whereas the new bill would allow them to use other types of property or rights, such as inventory, machinery, raw materials, claims or a business itself.

Under the new rules, all collateral contracts must be registered with the Commerce Ministry's Business Development Department.

Debtors will also have the right to use or sell the collateral should the loan be defaulted.

If there are several creditors with claims to the same collateral, they will be paid back in accordance with the details of the contracts signed.

In cases where a business is used as collateral, the contract will have to be overseen by an expert, but in the event other types of property or assets are used, creditors can have the contract enforced independently.

Korn also proposed the Civil and Commercial Code be amended so that creditors were given the right to claim full repayment should there be a default on a mortgage.

The finance minister said he expected the new bill to increase bank lending and that state-owned banks would be more willing to lend to small and medium-sized businesses, because they would be more confident about their debts being repaid.

Meanwhile, Korn said the outbreak of type-A (H1N1) influenza had not affected the economy too seriously, because hotel occupancy nationwide increased 15-20 per cent over the recent long holiday weekend.