Banks interested in bidding for bridging loan to pay rice farmers

Economy May 28, 2014 00:00

By Sucheera Pinijparakarn
The Na

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Commercial banks have expressed strong interest in bidding for an overall Bt50-billion bridging loan under the rice-pledging project, as they believe the payment of long-overdue money to farmers marks the first step in fuelling the sluggish economy.

Their interest comes after the Finance Ministry invited 32 state and private banks to bid for the first phase of a three-year programme of bridging loans totalling Bt50 billion to the Bank for Agriculture and Agricultural Cooperatives (BAAC), so that rice farmers can be paid.
The first Bt30-billion tender will take place on June 6, while a second is scheduled for June 13.
Vasin Vanichvoranun, executive vice president of Kasikornbank, said yesterday that assuming legal issues surrounding such lending were fully clarified, the bank should have no problems about participating in the bidding.
“Rice payment [to farmers] is a good way to fuel the economy. However, we also have to pursue other projects, including infrastructure projects, which have not been announced yet,” he added.
Bridging loans are not risky ventures for banks and, with many institutions interested in joining the bidding, the loan rate will be reasonable for the borrower – in this case, the BAAC. 
Under such lending, commercial banks will quote an interest rate based on the six-month Bangkok Interbank Offered Rate, which is currently 2.3 per cent.
Chansak Fuangfu, director and senior executive vice president of Bangkok Bank, said a bridging loan would have a multiplier effect on the economy, but the bank would have to review its position in terms of overall potential lending demand for the remainder of the year.
“What the bank has to monitor is additional public investment projects, which will fuel the economy significantly. We are awaiting the upcoming economic road map from the National Council for Peace and Order [NCPO},” he said.
Arthid Nanthawithaya, senior executive vice president of Siam Commercial Bank, said the bank was currently considering its liquidity position in light of its readiness to participate in the bidding.
In his view, using such a loan to pay rice farmers may not shore up the economy greatly, as the farmers have to repay debt to their own lenders.
However, what he does see as a positive sign for the economy – and for boosting private-sector confidence – is the fact that the NCPO has announced it will give importance to public investment, and especially to major infrastructure projects.
“This assures that public investment will happen soon,” he said.
When the 2015 fiscal-year budget is finalised, new investment by the private sector is expected to resume after having been largely suspended during the prolonged political unrest, he added.
Piti Tantakasem, chief wholesale-banking officer at TMB Bank, said that paying money owed to farmers for rice pledged under the subsidy programme was the first positive sign that the economy and domestic consumption were being given a much-needed shot in the arm.