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.