Kulit Sombatsiri, director-general of the ministry's State Enterprise Policy Office, said his agency had never floated the idea of integrating SME Bank into the GSB, which has a stronger financial position and whose bad loans are fairly low at 1% of the total.
"The best method for addressing troubled state-owned financial institutions is to conduct due diligence to get an X-ray of their problems," he said.
SME Bank is among four financially troubled state enterprises required by the junta-appointed State Enterprises Policy Commission or superboard to conduct due diligence of assets and liabilities to let policymakers know exactly their financial positions as part of its efforts to boost efficiency.
The other three enterprises are the Islamic Bank of Thailand, TOT Plc and Cat Telecom Plc.
The due diligence must completed within three months.
Three more state enterprises — Thai Airways International Plc, the State Railway of Thailand and the Bangkok Mass Transit Authority — are expected to be the second batch the superboard will instruct to conduct due diligence and submit business rehabilitation plans.
SME Bank is now saddled with a high rate of non-performing loans (NPLs), representing 38% of total lending.
Meanwhile, Kritsada Jinavijarana, director-general of the Fiscal Policy Office, said the idea of merging SME Bank and the GSB had been proposed by the World Bank to solve the problems of the state lender for SMEs, but the FPO had not pursued the idea.
A Finance Ministry source said the World Bank had raised the idea of merging the two state-owned financial institutions to solve SME Bank's high NPL rate.
SME Bank is a small financial institution, and commercial banks have also extended loans to SMEs, the source said.
However, the Finance Ministry still considers SME Bank essential, as commercial banks are reluctant to lend to start-ups and SMEs.
Moreover, the GSB does not want to shoulder the burden of SME Bank's NPLs, while the bank's staff also oppose any such merger.