Banks lend more to SMEs

The amount of new loans to small and medium-sized enterprises (SMEs) in May increased by 20 billion baht from the previous month, a sign that banks have been more enthusiastic on lending with the improved economic climate.

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Despite the lower new SME loan growth in May, it outpaced an 8.8% year-on-year overall loan growth of commercial banks, said Salinee Wangtal, an assistant governor of the supervision group.

SME loans in May grew 10.3% over the same period last year, slightly below the 10.8% rise in April.

SMEs were the most vulnerable to the seven-month political impasse, with many falling short of liquidity. Helping SMEs is one among the military junta's priorities. 

"Loans overall and to the SMEs showed sign of improvement. Percentage growth declined, but the amount increased. Moreover, loans extended by commercial banks in May rose by 53 billion baht, exceeding the normal level of 20 billion a month," she said.

Non-performing SME loans increased to 3.8% in May of total lending, up from 3.6% recorded in April, but the ratio was not a major concern, she said.

Total loan growth in the commercial banking system expanded by 8.8% year-on-year in May, down from April’s 9.5%. Total NPLs increased slightly to 2.4% in May, up from 2.3% recorded in April.

Mrs Salinee said SME loan extension in the second half could increase as lending in the third and the fourth quarter is typically higher than the second quarter. The improving economic environment coupled with the government's economic stimulus measures will help boost SME loan growth.

The Bank of Thailand has asked banks to relax their calculation method for loss given default — amount of funds that is lost by banks when a borrower defaults — to encourage them to extend SME loans, governor Prasarn Trairatvorakul said.

The central bank has also requested banks to help relieve SMEs' financial costs by maintaining fees charged for the sixth transactions and more made at each bank's teller counter, and waiving front-end fee for this year and refinancing fee when SMEs refinance loans to other banks.

At present, banks charge higher fees for financial transactions exceeding five.

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