Thai banks have announced a 25 basis points reduction in lending rates for vulnerable groups over a period of six months in response to a government plea to aid small businesses, according to the announcement from the bankers’ association on Thursday.
Prime Minister Srettha Thavisin has continuously urged the central bank to cut rates, currently at a more than decade high of 2.50%, citing negative impacts on businesses due to high household debt and China’s economic slowdown.
Contrary to government expectations, the Bank of Thailand has kept its key interest rate steady in the face of economic challenges. Meanwhile, the bankers’ association stated that its decision aligns with the government’s strategy to stimulate economic growth and also complies with the central bank’s principles of responsible lending.
While the timeline for implementing the rate cuts remains at the discretion of each individual bank, the association’s initiative is seen as a step towards aligning with government efforts to boost the economy. The central bank recently indicated that the current policy rate is well-positioned to manage economic risks, although adjustments could be made if necessary during the next rate review on June 12.
CGS International Thailand (CGSI) expected Kasikornbank and SCB X to be the most impacted from this cut, given high exposure in SMEs and retail loans. This could lead to a quick impact to Thai banks’ bottom line around 1.2%.
Meanwhile, BBL is expected to be the bank with least impact given most are corporate loans and impact could be minimal given it a temporary cut for now and would not apply for all SMEs/retail loans but only to vulnerable groups.
