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GSB, BAAC unions protest loan to pay rice farmers

The Government Savings Bank Trade Union yesterday issued an open letter calling for an immediate halt to any attempts to prod the GSB into lending to the state-run Bank for Agriculture and Agricultural Cooperatives, even if the loan would be used to make long-overdue payments to farmers for rice pledged to the government.

The southern branch of the BAAC's labour union also issued a letter to the entire staff asking them to dress in black today in protest against the delivery of the Bt20-billion interbank loan scheduled today from the GSB to the BAAC for payments to rice farmers.

The GSB letter claimed the loan to the BAAC was not needed as the BAAC already had sufficient liquidity, as widely reported. It demanded that GSB management immediately cancel any loan, if granted already or offered to the BAAC. It also called on management not to offer credit in a manner that would weaken the confidence of customers, or the public, or disrupt the bank's affairs.

The campaign for BAAC staff to wear black follows news reports that the BAAC borrowed Bt20 billion last week from the interbank market, which is for loans of up to 30 days at low interest from banks with excess liquidity to banks needing short-term liquidity. One-fourth or Bt5 billion was sent from the GSB to the BAAC on Friday, and the next Bt5 billion will be transferred today.

The BAAC's southern labour union statement said this loan would erode customer confidence in the bank's liquidity.

Normally, a bank will tap the interbank market when it faces a liquidity problem but the BAAC does not have such a liquidity problem that it needs help from the GSB. This means the bank is using this way to support the government's rice-pledging scheme.

"If the BAAC's management continues to borrow funds, the labour union will escalate the level of its anti-bank management activities," the letter said.

Caretaker Commerce Minister Niwatthamrong Boonsongpaisan said the government was ready to pay what it owes to rice-pledging farmers at the rate of Bt4 billion a day on average starting today after the government succeeded in raising funds from both borrowing from banks and selling its rice in the open market.

The ministry's Foreign Trade Department reported that the rice auction last Wednesday succeeded in selling 460,000 tonnes. Combined with direct sales to exporters of 200,000 tonnes, the department will have brought in Bt7 billion. This does not include the sale of 220,000 tonnes via the Agricultural Futures Exchange of Thailand on Thursday, which will be finalised today.

GSB president Woravit Chailimpamontri told a press conference yesterday that the bank decided to extend the interbank loan of Bt5 billion to the BAAC to help improve the liquidity of the BAAC, following the bank board's approval on January 8.

The GSB will take care of all deposits, and this will not be affected by its granting the interbank loan to the BAAC, he said, adding that the loan decision was in line with good governance.

"The bank has the right to suspend giving a new credit line in the interbank market to the state-run Bank for Agriculture and Agricultural Cooperatives if the GSB finds larger cash withdrawals within the next few days," he said.

The GSB used its profit and retained capital as the source of funds, not deposits, for the interbank loan to the BAAC, he said.

The maximum credit line to the BAAC is Bt20 billion, but the GSB has not yet considered giving that much to the BAAC, he said.

Under the loan agreement, the BAAC is requested to repay its debt within 30 days before drawing again on the credit line.

The transfer of the Bt5 billion interbank loan will depend upon the borrower's purpose, he said when asked if the loan will be used to make overdue payments to rice farmers, since the BAAC is responsible for allocating rice-scheme payments to farmers.

The GSB has Bt1.87 trillion in deposits, Bt2.17 trillion in assets and Bt200 billion in liquidity.

"We hope our customers will understand what the bank does. We provide interbank loans to 35 banks in the system, not only for the BAAC. And we hope our customers will not come in to withdraw money from the bank," he said.

Kittiya Todhanakasem, a first senior executive vice president of state-invested Krungthai Bank, said the bank did not approve the interbank loan of Bt20 billion to the BAAC as reported in the media.


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