Thailand: Banks vow to keep rates steady for the time being

Local major banks plan to hold their interest rates steady if the Bank of Thailand raises the policy rate on Wednesday, as they want to mitigate its impact on borrowers amid a gradual economic recovery.

Kasikornbank (KBank) chief executive Kattiya Indaravijaya said the lender would keep its current interest rates unchanged if the central bank’s Monetary Policy Committee (MPC) decides to hike the benchmark rate today.

However, the bank will raise both deposit and loan rates if the MPC raises the policy rate twice this year, she added.

“We can hold the interest rates unchanged until the policy rate rises two times during the rest of the year. The bank wants to support borrowers to avoid hardship amid the gradual rebound of the Thai economy. But if the Bank of Thailand hikes the policy rate by two times, we will follow the rate hike by raising both our deposit and loan rates,” she said.

KBank, the country’s second-largest lender by assets, will take additional care of some vulnerable corporate and individual clients amid the uneven economic recovery, Ms Kattiya said. 

Besides the impact of the Covid-19 pandemic, some customers have been suffering from the effects of the Russia-Ukraine war, particularly as costs have risen in line with higher energy prices and the inflation rate.

As a result of the external risk factors, KBank will maintain sufficient loan loss provisions in preparation for unexpected situations. However, the Thai economy has shown clear signs of recovery, mainly attributable to the rebounding tourism sector, Ms Kattiya said.

Economists forecast that the MPC will raise the benchmark policy rate by 25 basis points on Aug 10. They expect the committee to raise the policy rate twice this year.

The rate has been left unchanged at the current record low of 0.50% since May 2020. A rate hike would be aimed at tackling surging inflation.

There are three more MPC meetings this year, on Aug 10, Sept 28, and Nov 30.

Krungthai Bank’s president Payong Srivanich said the bank would not increase its interest rates immediately if the Bank of Thailand raises the rate today.

However, Krungthai cannot say how long it can keep interest rates unchanged as it depends on the situation.

“We want to support customers amid the trend of rising interest rates. That is the bank’s priority, so we will delay an interest rate increase for a while after a policy rate hike,” he said.

Siam Commercial Bank’s (SCB) chief executive Kris Chantanotoke said the bank can delay an interest rate increase for a while after a policy rate rise. SCB would mainly focus on supporting vulnerable customers who have been impacted by the double whammy of the pandemic and surging inflation.

Chartsiri Sophonpanich, president of Bangkok Bank, said that the bank would try its best to take care of customers in the event of interest rate moves.

Earlier, heads of state banks said they would try to hold their interest rates steady for as long as they could so customers would not be impacted by a policy rate hike.

Some business sectors are concerned about the effect of the central bank’s anticipated interest rate hike on companies and the public, while related private and state organisations have vowed to do their best to help them alleviate the impact.

Earlier the Federation of Thai SMEs expressed its concern about a higher policy rate and is calling for authorities to prepare measures to help small and medium-sized enterprises (SMEs) deal with the impact.

A rate increase will increase financial costs, reduce financial liquidity, and cause SMEs to lose competitiveness in the market, said Sangchai Theerakulwanich, president of the federation.

Source: https://www.bangkokpost.com/business/2365129/banks-vow-to-keep-rates-steady-for-the-time-being