Nano-financing will not increase the level of non-performing loans in the financial system, the Bank of Thailand (BOT) has said.
BOT spokesman Chairathep Senivongs Na Ayudhya said this meant the introduction of nano-financing would not pose a threat to the country's financial stability because it did not directly relate to the commercial banking sector and was more closely related to private lending agents.
Chairathep said the nano-finance idea had been coined and spearheaded by the Ministry of Finance. He said it was meant to help grassroots people who could not access small loans from large financial institutions. The BOT was currently helping conduct research on grassroots financing in terms of market conduct, complaints handling, and financial literacy. In response to the S&P Ratings Services' warning that the shaky economic recovery and the current high level of household debt could hurt the asset quality of Thai banks in the near future, Chirathep said the rising level of non-performing loans was in line with the economic recovery and the increase in loans. He said the gradual increase of household debt to gross domestic was due to the slowdown of the economy in 2014, which made GDP the denominator in the calculation of household debt to GDP. This gave the appearance that the growth of household debt was increasing when it was actually slowing. Chirathep revealed that the year-on-year percentage of household-debt growth had decreased more than 15 per cent in 2012 to 10.1 per cent in the first quarter of this year and was down to 8.1 per cent in the second quarter of 2014. But he said household debt to GDP had gradually increased to 83.5 per cent in the second quarter because nominal-quarterly GDP growth had swung up and down during the same period. GDP growth for the full year was projected to slow to 1.5 per cent compared to slowing to 2.9 per cent in 2013. He said rising household debt to GDP would stabilise once the economy returned to normal expansion and the BOT's latest GDP growth prediction for 2015 was 4.8 per cent, which was almost in line with the country's real GDP growth potential of around 5 per cent per year. The spokesman revealed that the current NPL level in the financial system had increased from 2.15 per cent at the end of 2013 to 2.34 per cent in the third quarter this year. The current figure was considerably low while the banks' reserves-to-NPL ratio was 135 per cent, which was considerably high. Chirathep clarified BOT governor Prasarn Trairatvorakul's comment regarding the policy interest rate. He said the governor meant to say the monetary policy was relaxed enough and there was no talk of it being relaxed even further but the central bank was flexible enough to listen to additional information before analysing and revisiting the issue at a Monetary Policy Committee meeting on December 17.
Nano-financing will not increase the level of non-performing loans in the financial system, the Bank of Thailand (BOT) has said.
BOT spokesman Chairathep Senivongs Na Ayudhya said this meant the introduction of nano-financing would not pose a threat to the country's financial stability because it did not directly relate to the commercial banking sector and was more closely related to private lending agents.
Chairathep said the nano-finance idea had been coined and spearheaded by the Ministry of Finance. He said it was meant to help grassroots people who could not access small loans from large financial institutions. The BOT was currently helping conduct research on grassroots financing in terms of market conduct, complaints handling, and financial literacy. In response to the S&P Ratings Services' warning that the shaky economic recovery and the current high level of household debt could hurt the asset quality of Thai banks in the near future, Chirathep said the rising level of non-performing loans was in line with the economic recovery and the increase in loans. He said the gradual increase of household debt to gross domestic was due to the slowdown of the economy in 2014, which made GDP the denominator in the calculation of household debt to GDP. This gave the appearance that the growth of household debt was increasing when it was actually slowing. Chirathep revealed that the year-on-year percentage of household-debt growth had decreased more than 15 per cent in 2012 to 10.1 per cent in the first quarter of this year and was down to 8.1 per cent in the second quarter of 2014. But he said household debt to GDP had gradually increased to 83.5 per cent in the second quarter because nominal-quarterly GDP growth had swung up and down during the same period. GDP growth for the full year was projected to slow to 1.5 per cent compared to slowing to 2.9 per cent in 2013. He said rising household debt to GDP would stabilise once the economy returned to normal expansion and the BOT's latest GDP growth prediction for 2015 was 4.8 per cent, which was almost in line with the country's real GDP growth potential of around 5 per cent per year. The spokesman revealed that the current NPL level in the financial system had increased from 2.15 per cent at the end of 2013 to 2.34 per cent in the third quarter this year. The current figure was considerably low while the banks' reserves-to-NPL ratio was 135 per cent, which was considerably high. Chirathep clarified BOT governor Prasarn Trairatvorakul's comment regarding the policy interest rate. He said the governor meant to say the monetary policy was relaxed enough and there was no talk of it being relaxed even further but the central bank was flexible enough to listen to additional information before analysing and revisiting the issue at a Monetary Policy Committee meeting on December 17.
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