Banks look to higher loan demand for rice-industry working capital

Economy February 14, 2014 00:00

By Sucheera Pinijparakarn
The Na

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Banks expect to enjoy rising demand for working-capital loans from rice millers and packers bidding for rice released by the Commerce Ministry via public auction and the Agricultural Futures Exchange of Thailand (Afet).

The ministry yesterday put about 220,000 tonnes of rice on the Afet for sale and on Wednesday the Public Warehouse Organisation opened bidding for 467,623 tonnes as part of a 1.2-million-tonne rice-sale plan.
About 18 bidders joined the auction, according to the ministry’s report.
Prasit Wasupath, a senior executive vice president of Krungthai Bank, said KTB had a short-term loan for existing rice traders that joined the bidding. 
The bank has issued its internal practice manual to branch managers as a guideline in considering loans to customers.
KTB had been criticised on social media for lending to the government to subsidise the rice-pledging scheme, prompting president Vorapak Tanyawong to hold a press conference to defend the bank. He insisted that it did not give the loans and it upholds the principles of good governance and transparency and would not allow anyone to use it as a political tool.
Prasit said the bank also tightened the criteria for rice bidders by requiring millers or packers to be existing customers with credit lines of no more than Bt200 million each from the bank. 
The customers must have been registered with the Commerce Ministry since 1946 and their businesses must show profits for two straight years.
KTB will lend no more than 70 per cent of the winning bids and customers will repay the debt with the bank within nine months.
Customers are required to outline the objective of their bidding plans before applying for a loan.
KTB has 300 rice millers in its customer base. This short-term loan programme was not designed for the troubled rice-pledging scheme. It is a regular programme to provide liquidity to rice-trading customers that might require working capital if they win bids.
Sammit Sakulwira, first senior vice president of Kasikornbank, said the rice bidding through the traditional and futures markets will spur demand for working capital loans from the rice-trader segment.Existing customers with credit lines from the bank can ask for a short-term loan to pay the ministry if they are bid winners.
KBank did not set loan qualifications as strict as KTB’s.
Credit lines range from Bt10 million to Bt100 million depending on the repayment ability of each customer but the borrowers are required to repay debt within three months, Sammit said.