TDRI Calls for Increased Competition in Thailand’s Banking Sector

BANGKOK (NNT) - An academic from the Thailand Development Research Institute (TDRI) believes that the average interest rates for deposits and loans in Thai commercial banks are excessively high compared to many other countries. They advise the government to utilize state-owned banks to foster competition in the financial market.

This comment was prompted by online criticism from a well-known columnist, Sorakon Adulyanon, better known as “Num Muang Chan.”

In response, Nonarit Bisonyabut, a research fellow at TDRI, stated that the rapid 17% growth in profits of commercial banks contrasts sharply with the overall economy’s modest 3% expansion.

Furthermore, when comparing the interest rates for deposits and loans of Thai commercial banks with those in developed and developing countries, it was found that the global average deposit rate is between 0 and 2%, while in Thailand it stands at 0.25%.

Additionally, the global average loan interest rate ranges from 5.5 - 8%, with Thailand averaging at 7%. This suggests that while Thai banks offer low deposit rates, their loan rates are among the highest.

This reflects a lack of competition among commercial banks, as the interest rates for deposits and loans are similar across all banks. This is unusual given the large number of commercial banks and the Thai people’s preference for saving in bank accounts over other investment forms, such as stocks, bonds, and other financial products. As a result, the competition for returns on savings in the form of interest rates is limited compared to many other countries.

Therefore, the government should utilize the mechanisms of state banks to increase competition in the financial market, including incentives through higher deposit interest rates and lower loan interest rates.

By Krajangwit Johjit