FPO calls for merger of SME Bank, GSB

Bad loans serious problem: Kittiratt

The Finance Ministry should merge the Small and Medium Enterprise Development Bank of Thailand with the Government Savings Bank (GSB) as the SME Bank has several problems, including a high rate of non-performing loans (NPLs), according to a study by the Fiscal Policy Office (FPO).

SME Bank's NPLs stand at Bt30 billion or 30 per cent of its outstanding loans. This year it is expected to pile up an additional Bt10 billion worth of bad loans, while its management tries to hold the total at Bt30 billion. Its goal is to reduce the NPL rate to a single digit.

Finance Minister Kittiratt Na-Ranong said yesterday that he agreed with the FPO's proposal that SME lending should handled by a unit of the GSB, but in the meantime SME Bank must urgently reduce its NPL level before the ministry will consider such a merger. He said it was not appropriate that SME Bank's NPLs would be inherited by the GSB and affect its financial strength.

He added that he had discussed the matter with Prime Minister Yingluck Shinawatra and he would make the final decision on the matter.

Kittiratt said SME Bank had several unsolved problems besides the high NPL rate, including an alleged lack of transparency in its lending practices.

He said the SME Bank was meant to act like a nursery for small and medium businesses, which once they are strong enough to grow on their own, can switch to borrowing from commercial banks.

Areepong Bucha-oom, the Finance Ministry's permanent secretary, said it had yet to draw up a merger plan but had been worried about the performance not only of SME Bank but of the Islamic Bank of Thailand, because of the high level of NPLs they have accumulated. The ministry had assigned the FPO to seek ways to solve these problems.

The ministry is prepared to inject a total of Bt1 billion into SME Bank and Islamic Bank but whether this would strengthen them depended on how much they could reduce their bad loans, he added.

The SME Bank board of directors late last year set up a committee to improve its performance. It has also set up a new post of senior executive vice president for operations to support the president.

The bank issued a call for a new president after Soros Sakornvisava resigned from that post late last year.