Banks hesitant about following BOT's move to raise interest rates

BANGKOK: -- Local commercial banks need not raise lending and deposit rates in parallel with the policy interest rate hike by the Bank of Thailand’s Monetary Policy Committee since liquidity in the system remains high, according to a veteran banker.

Chatichai Payuhanavee, Senior Director of Kasikornbank Plc’s Consumer Loan Division, said although MPC decided to raise the 14-day repurchase rate by 25 basis point to 5 per cent, it did not mean the commercial banks must increase the interest rates immediately.

He reasoned any move to raise the interest rates would fuel the banks’ costs.

At the same time, the liquidity in the system is still as high as 600 billion baht and the minimum lending rate is already considered high at current.

Given the current situation, he conceded, the interest rates still have a room to increase further.

However, he did not think any banks would raise MLR up to 10 per cent under the current circumstance.

“The interest rate has normally moved up and down like the economy. What we can do is to supervise it to prevent adverse impacts on the economy,” he said.

--TNA 2006-06-08

TBA believes latest repo hike is final time for this year

BANGKOK: -- Thai Bankers’ Association’s Secretary-General Thawatchai Yongkittikul on Thursday expressed confidence the decision by the Bank of Thailand’s Monetary Policy Committee to raise the policy interest rate at its meeting on Wednesday would be the final time for this year.

He said the MPC’s move to raise the 14-day repurchase rate by 0.25 basis points was aimed at curbing the inflation rate hike and keeping the repo close to key interest rates adopted by the United States’ Federal Reserve.

Mr. Thawatchai said he personally viewed the latest repo hike would not adversely affect deposit and lending rates in the banking system because he believed it would be the final repo increase for this year.

“In my opinion, financial institutions may opt not to raise deposit and lending rates, or, if any, they may edge up the rates only slightly,” he said.

He said the second-hand housing market would not be adversely affected by the interest rate hike since more Thai customers began to have good attitude to purchasing second-hand houses and creditor financial institutions had soft loan services to provide to them.

Asked to comment on the overall economy of the country, he said, the fuel price hike would remain a key risk factor to the economic growth. However, he began to see a sign of fuel price slowdown, which fares better for the economy.

--TNA 2006-06-08