Thai banks remains cautious despite liquidity surplus

Thailand’s banking sector is experiencing a significant liquidity surplus, according to a Bank of Thailand (BoT) assistant governor. The central bank has not yet increased its lending oversight, indicating a cautious approach by banks when it comes to extending loans.

Sakkapop Panyanukul, in an article featured on the BoT’s website, explained that banks’ lending decisions are closely tied to the borrowers’ repayment capacities. Over the past decade, the banking system has consistently shown high levels of excess liquidity.

Sakkapop stated that this is evident from the substantial deposits and investments held by commercial banks at the central bank.

“The banking system has had a lot of excess liquidity over the past 10 years, as reflected by deposits and investments of commercial banks at the BoT in the past.”

These deposits and investments have ranged between 4 and 5 trillion baht (equivalent to approximately US$115.64 to US$144.55 billion).

The Thai government has identified high household debt as a barrier to its economic growth initiatives, particularly in the wake of the pandemic’s lingering effects. To address this, the government has been encouraging commercial banks to expand credit access and stimulate economic activity.

Sakkapop also pointed out that the central bank’s lending regulations emphasise the importance of setting instalments that are manageable for borrowers but do not impose strict oversight on lending practices.

“The central bank’s responsible lending rules only state that banks must consider setting instalments that are appropriate for the debtors’ living expenses.”