Thailand's SME Bank seeks Bt3-6 billion for rehabilitation

By English News

BANGKOK, Feb 7 – The financially-troubled Small and Mediium-Enterprise (SME) Bank has requested a government allocation of a Bt3-6 billion capital increase under a three-year rehabilitation plan, according to a senior bank executive.

Pichai Chunhavajira, SME Bank chief executive officer, insisted that the bank will not merge with the Government Savings Bank but will instead resolve its problem of Bt39 billion in non-performing loans (NPL) under a rehabilitation plan which was recently submitted to the Finance Ministry.

newsjs

The Bt39 billion in bad loans represent 40 per cent of the bank's total Bt100 billion in loans.

The SME Bank will gradually reduce its NPLs to Bt28 billion this year, Bt23 billion next year and Bt17 billion in 2015, he said, adding that the bank will improve its personnel management and information technology system to effectively seek repayment of the loans.

He said the bank is ready to negotiate for interest reduction to debtors, many of whom had produced land title deeds as collateral.

New loans will be offered with more efficiency with reasonable interest rates in accord with government policy so that it will not affect the bank’s stability, he said.

He added that minimum retail rate (MRR) will be increased from 4-5 per cent to 8 per cent .

With rehabilitation, he said, the SME Bank’s performance should improve in the second quarter of this year.

The Islamic Bank of Thailand is another state-operated financial institution with a high percentage of NPLs and was also instructed by the Finance Ministry to submit its rehabilitation plan. (MCOT online news)

-- TNA 2013-02-07

The Bt39 billion in bad loans represent 40 per cent of the bank's total Bt100 billion in loans.

What kind of management approves loans of which 40% turn out to be duds?

The Bt39 billion in bad loans represent 40 per cent of the bank's total Bt100 billion in loans.

What kind of management approves loans of which 40% turn out to be duds?

One run by the State. It's how governments print money by stealth. All of the money loaned by banks into the economy is newly created at that point - no account is deducted and the bank gains an "asset". The loaned money is then spent into the economy by the sellers and trickles down the food chain from there. The amount of credit money dwarfs the amount of printed money.

The Bt39 billion in bad loans represent 40 per cent of the bank's total Bt100 billion in loans.

What kind of management approves loans of which 40% turn out to be duds?

2007 Financial Crisis - there's a long list involved there

My question is since when does the government concern itself with Small and Mediium-Enterprise

I thought they were only looking to help big business.

My company's HQ was inside the 'live fire' zone in Ploenchit during the Red silliness in 2010.

The SME Bank offered SME businesses inside the zone extremely favourable rates on loans of up to 1m Baht. Our business qualified, as it is a manufacturing-based enterprise, and we took advantage of almost free money from them.

I like the SME Bank

All enterprise banks support entrepreneurs with ideas and expansion. Invariably due to the assistance schemes usually underwritten by the Govt, NPL's are rather higher than say commercial loans and secured loans. What is missing from the equation is the ability of management to assess risk against projection or in Thailand's case, a few Baht passed under the table for a loan to go through knowing it will never be repaid.

Greshams Law but only for loans this time. Say a bank makes 100 loans of which 5 go bad. As a result of the 5 bad ones, liquidity and capital are hit so the banks slows new lending. If new loans been granted are less than the amounts bieng repaid, the overall size of the loan book falls. Dial on a few years and the original 100 loans is down to 30 (including the 5 dud ones) but only 30 additional lons have been made. NPL ratio therefore climbs from 5% to 8.3% without a single further loan going bad. If however a further 3 loans had gone bad over the period, the ratio jumps to 13.3%. I have seen this spiral at work in other countries as well (e.g. Kuwait).

However...... SME Bank was always a bit 'political' so the 405 is not a major surprise while as regards Islamic Bank of Thailand $$#?""*

The Bt39 billion in bad loans represent 40 per cent of the bank's total Bt100 billion in loans.

What kind of management approves loans of which 40% turn out to be duds?

could be to do something with giving credit cards to farmers while i , farang, got x amount on the bank and cannot get a credit card ????????????????

The other paper informs us that this request for reimbursement of these dubious loans from the Finance Ministry (AKA taxpayers) is highly unusual, nay, it's unprecedented.

The SME Bank is rationalizing the request because the loans were issued in support of the government's public service initiatives.

Because these loans were issued for governmental objectives, proper screening of them was not conducted and the result is a very high default rate with the SME Bank having the highest Non-Performing Loan rate of any bank in the country.

So in the end.... 39,000,000,000.00 Baht has essentially disappeared... and the taxpayers are being asked to pay for it.

Sounds fair.

.

.

For those unfamiliar - Islamic banking is a contrivance to get around sharia law which forbids the charging of interest. For example, if a muslim wishes to buy land or a car, the bank buys it and sells it to the customer at a higher price equivalent to the original plus compound interest (while holding title or deeds as collateral).