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Business loan demand likely to rise this quarter, BOT survey finds

Demand for lending among businesses has shown signs of picking up in the third quarter - with most demand in the corporate sector - reflecting the recovery of business confidence, according to a Bank of Thailand survey.

The central bank surveyed 23 commercial banks and 17 non-bank businesses to determine the outlook for lending demand. The 40 institutions cover 91.8 per cent of lending in the financial system.

The institutions expected loan demand to resume this quarter, with the key industries wholesale and retail, transport and warehouses, construction materials, automobiles and auto parts, and electricity generation.

In the second quarter, credit demand among small and medium-sized enterprises declined from the first quarter while the loan demand of corporations improved more than expected.

The financial institutions said borrowings by SMEs had been used for working capital, reflecting that the businesses had not recovered yet.

Large-scale corporations wanted loans for investing in durable assets, showing that their trend of investment was improving after the political unrest was resolved.

However, lenders have retained their criteria after tightening credit approval in the previous quarters, following concerns over the economic slowdown and credit risk from high household debt.

The survey also found that financial institutions had continued to tighten criteria for housing loans and credit cards after doing so for eight quarters consecutively.

Lenders are still worried over the quality of retail borrowers especially for instalment loans.

According to the BOT, most financial institutions have predicted that credit demand among households will increase and the number of mortgages is expected to increase from the previous quarter, reflecting a gradual rebound of the property market as well.

Most financial institutions agreed that low interest rates were a key factor in raising mortgage demand.

This quarter, financial institutions expect demand for credit-card loans and household loans to increase from the previous quarter, pointing to better private consumption in the coming quarters.


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