The Government Savings Bank's soft loans of 100 billion baht to cash-strapped small and medium-sized enterprises (SMEs) are expected to be fully drawn down by year-end, its chief says.
The loans are allocated through financial institutions and the amount depends on their ability to relend to SMEs, said GSB president Chatchai Payuhanaveechai.
The state-owned bank yesterday signed contracts to provide the soft loans through 20 financial institutions.
The scheme is part of measures to help SMEs, who are most at risk from the economic doldrums, to gain better access to fresh financing.
Others include the Thai Credit Guarantee Corporation's 100-billion-baht credit guarantee scheme offering full non-performing loan coverage for up to 15% of the portfolio and half coverage for 15-30% of the portfolio; corporate income tax cuts; a five-year tax exemption for SME start-ups; and a 6-billion-baht venture capital fund.
Under the soft loan scheme with a seven-year maturity, commercial banks will take out the loans from the GSB when they approve such loans to their SME customers, while banks will be required to provide promissory notes in exchange for the loans, Mr Chatchai said.
The GSB will charge commercial banks interest at 0.1% and the latter will relend to SMEs at 4%.
The Finance Ministry will subsidise 2.2% of the GSB's financial costs plus 0.75% of management costs.
Mr Chatchai confirmed that extending 100 billion baht in soft loans would not have any effect on the bank's financial liquidity as it has another 200 billion baht available as a liquidity surplus, which is sufficient for the GSB's normal course of business.
Apart from the 100-billion-baht soft loans, the GSB is also taking part in a scheme to lend 30 billion baht to Village Funds under the government's separate economic stimulus package aimed at putting money into the pockets of low-income earners in rural areas who have been badly hit by the sharp fall in farm product prices, the drought and the stuttering economy.
Mr Chatchai said the bank had already approved 11 billion baht in loans to Village Funds and the entire 30 billion will be taken out by year-end.
The GSB and the Bank for Agriculture and Agricultural Cooperatives will lend to 59,000 Village Funds at zero interest for the first two years for relending to rural residents.
Low-income earners are prohibited from using Village Fund cash to repay debts, thus ensuring the money is injected back into the economy.