Bank of Thailand sees no surge in bad loans after policy rate hike

The Bank of Thailand (BoT) on Tuesday it expected no surge in bad loans despite a hike in the benchmark interest rate and urged banks to gradually adjust their rates to help vulnerable groups.

Banks’ non-performing loans (NPLs) should gradually rise, helped by debt support measures, Suwannee Jatsadasak, senior director at the BoT, told a news conference.

“We still don’t expect the cliff of NPLs under the support measures available,” she said, referring to large debt defaults in a very short time.

Banks’ NPLs stood at 2.88% of total lending at the end of June, slightly down from 2.93% at the end of March, due to debt restructuring and banks’ loan management, she said.

The support measures remain sufficient to help debtors affected by the Covid-19 pandemic, rising living costs and higher interest rates, Ms Suwannee said.

However, vulnerable groups such as low-income earners and smaller businesses are a worry, she said.

Last week, the BoT raised its key interest rate for the first time in nearly four years, by 25 basis points to 0.75%, to curb inflation and signalled further gradual hikes.

While the teh central bank wants to see the transmission of the policy rate, banks have been urged to gradually adjust their rates to help exposed groups, Ms Suwannee said.

With high levels of capital, loan-loss provisions, and liquidity, the banking system remains resilient and can provide loans to support the country’s economic recovery, she said.

Banks’ loans grew 6.3% in April-June from a year earlier.