Thai banks are set to cut the minimum retail rate (MRR) by 25 basis points for a period of six months, aiming to alleviate the debt burden for vulnerable customers in response to the prime minister asking lenders to lower interest rates for vulnerable groups and small businesses.
The Thai Bankers' Association (TBA) meeting on Wednesday decided to cut the MRR by 25 basis points for six months to ease the financial strain on fragile clients.
The decision was made after Prime Minister Srettha Thavisin met with chief executives of the country's largest banks: Bangkok Bank (BBL), Kasikornbank (KBank), Krungthai Bank (KTB) and Siam Commercial Bank (SCB).
Specific products, defining vulnerable groups and an effective date for the loan rate cut are up to the consideration of each bank, according to the TBA.
Payong Srivanich, chairman of the TBA, said the reduction of the MRR would help vulnerable customers struggling to service debt, enabling them to recover and transition as the economy rebounds.
This financial assistance aligns with both short-term stimulus efforts and long-term structural reforms initiated by the government, as well as the responsible lending approach of the Bank of Thailand, said Mr Payong.
Currently BBL, KBank and SCB all have an MRR of 7.30% per year, with KTB slightly higher at 7.57%.
Together, these four banks hold a substantial market share, representing up to 80% of the overall banking business.
Mr Srettha has repeatedly urged the Bank of Thailand to lower the policy rate to bolster the economic recovery.
However, the Monetary Policy Committee opted to keep the rate unchanged at 2.5% for a third straight meeting earlier this month, noting the Thai economy is sustaining its growth trajectory, surpassing the level of 2023.
Piti Disyatat, assistant governor for the monetary policy group at the central bank, said during an analyst forum on Wednesday the policy rate is appropriate, aligning with economic growth and supporting financial stability.
In addition, the inflation rate is expected to fall within the central bank's target range by the end of this year, he said.
The central bank foresees an improvement in economic momentum for the remainder of the year, driven by the disbursement of the fiscal 2024 budget starting in the second quarter, along with growth in the tourism sector and private consumption, said Mr Piti.
The regulator projects Thai GDP growth of 2.6% this year, up from 1.9% in 2023, with a gain of 3% anticipated in 2025.
The central bank encouraged commercial banks to adjust their business models to assist vulnerable customers, both through product offerings and interest rates.
Despite these challenges, the banking sector is expected to function as normal because of its overall financial stability, said Mr Piti.