Banks pooh-pooh bridge loan offer

The Finance Ministry called off yesterday's bridging loan auction aimed at borrowing to repay unpaid rice farmers as only a few banks participated in the bidding, adding to caretaker Prime Minister Yingluck Shinawatra's woes.

Growing opposition against the caretaker government's 130-billion-baht borrowing plan and worries as to whether caretakers have a mandate to borrow have discouraged banks from joining in the auction, said an unnamed source at the Finance Ministry.

Even state-owned banks such as the Government Savings Bank (GSB) and the Bank for Agriculture and Agricultural Cooperatives (BAAC) did not appear at the auction, the source said.

The first 20-billion-baht bridging loan auction, set for yesterday, is crucial for the Pheu Thai Party as 1 million angry rice farmers and party supporters are demanding the caretaker government pay them. Money from state rice stock sales is insufficient to make the payments.

The party risks losing voters if it does not pay farmers ahead of the election, though farmers are likely to wait for the payments due to the slim chance a new government could be installed in the next few months amid the political impasse.

The 20-billion-baht bridging loan is part of its 130-billion-baht borrowing plan.

The Finance Ministry planned earlier to borrow the bridging loans from financial institutions in Thailand before letting the BAAC issue bonds to be guaranteed by the ministry to repay the short-term loans.

Since the 2013-14 main rice crop began in October, 10 million tonnes of paddy worth 150 billion baht have been pledged under the rice subsidy scheme, but the BAAC has only paid around 50 billion baht to farmers.

The source said it was uncertain whether the next bridging loan bid would take place on Tuesday as scheduled because concerns over the legitimacy of the loans still lingers. The loan amount to be auctioned next week will be doubled to 40 billion baht if it is organised, the source said.

Banks still voiced concerns as to whether the borrowing is constitutional, though the Finance Ministry insisted the banks will be repaid even if the borrowing is voided later on, the source said.

The source also said the letter signed by the secretary-general of the Council of State advising that the borrowing plan can proceed as it will not add new debt has legal weight because this office has a mandate to consider the issue. There was a question earlier whether the letter was legally valid, as some critics argued the letter must be signed by a committee, not a secretary-general.

Piti Tantakasem, TMB Bank's chief wholesale banking officer, said it did not participate in the loan auction yesterday because of the unclear legal process. Because of the time crunch with the bank receiving the invitation letter on late Wednesday, it did not have enough time to consider the legal issues, he said.

For the next round of bidding, TMB will make a decision later, said Mr Piti.

A banking source said Kasikornbank also did not take part in the auction because of the unclear political situation and legal issues.

Share your thoughts

Discussion 1 : 01/02/2014 at 05:13 PM
It's the governments problem not the banks. They have run an unsustainable scheme the farmers money was owed from October at that time the government should have had the money to pay them. We are where we are now because the government have repeatedly lied about rice sales and have tried to blame everybody but them selfs.
Discussion 2 : 31/01/2014 at 10:57 AM
Now the banks are to be blamed. I couldn't help but laugh at this. Poor farmers. Why putting up with this government I wonder. Oh yeah, they are democratically elected. Almost forgot. My bad. :P
Discussion 3 : 31/01/2014 at 10:05 AM
It would be interesting to know who has received the 50 billion out of the 150 billion owing and what rational there was for those particular people to have received it.
Discussion 4 : 31/01/2014 at 09:45 AM
You need a mega loan shark to undertake this request of 130 billion baht!
Discussion 5 : 31/01/2014 at 09:04 AM
So the farmers can see it's not the government blocking the money, its the EC. A bridging loan is only needed because government bonds can't be issued, because elections haven't been done yet .
Discussion 6 : 31/01/2014 at 08:20 AM
I am continually amazed at the childlike niavity of these politicians and ministers, "Oh we are short of money! We will borrow some from the banks. We need billions urgently ! Give them a few days notice , that will be enough! I give them my word it will be repaid !. Thaksin gave his word to banks borrowing billions for companies that had no assets, transferred the money and the companies went bust.
Discussion 7 : 31/01/2014 at 07:07 AM
Time for this government to go visit the loan sharks, just as the farmers are forced to do.
Discussion 8 : 31/01/2014 at 04:27 AM
Well - the flip side of a corrupt system is distrust :) - Who wants to bourrogh money to another, if he get knowledge, this people put out money to the window and it is a real chance to never get back the money? - A reliable company will never do so. Maybe Ms. Yingluck shouldt invite Hedge-Fonds ( we call it in Germany "locusts") - or she give her own assets and of her clan Shinawatra for deposit :) - Since Karl Marx we know the economic krank is the most powerfull in politics. But offcourse only take the money of others and beware my own assets :)

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