GSB reserves 10 billion baht for repurchase loan market

The Government Savings Bank (GSB) is set to allocate 10 billion baht of capital to expand in the repurchase loan market to help small and medium enterprises (SMEs) facing shortages of cash.

The bank is preparing to deploy a new credit product adapted to the buyout activity of SMEs.

The product has been approved by the Bank of Thailand. The product is expected to launch in early November, said GSB President and CEO Vitai Ratanakorn.

The new offering is one of the bank’s financial products aimed at supporting SMEs that lack financial liquidity and are unable to use existing securities to apply for loans from financial institutions, as this contradicts the criteria loan set by the Bank of Thailand, Vitai said. .

The SMEs have therefore chosen to seek loans from the repurchase activity, which operates in the informal credit segment.

SME operators generally buy land when they are making a profit. They have experienced a cash shortage as the Covid-19 pandemic continues for an extended period, contributing to a drop in their stock prices, Mr Vitai said.

These economic operators cannot use their land as securities to solicit loans from banks, since central bank regulations stipulate that borrowers’ credit must be verified with the National Credit Bureau (BCN) and subject to payment. ‘a debt repayment analysis.

Most SME credit records do not qualify for loan approval, Mr. Vitai reiterated.

The conditions for loan approval by informal buyout firms are also tough, he said.

For example, a piece of land owned by an SME has an appraised value of 100 million baht, with the company wanting cash at only 10 million baht, but the condition says 15 million baht in the loan approval agreement.

Of the 15 million baht, 5 million baht is considered a loan charge, and the loan amount has 30% interest.

GSB will only engage in the credit buyback activity for a certain period or during the Covid-19 crisis to help struggling SMEs, Vitai said.

“According to our discussion with the central bank, we will not analyze the income or verify the credit of SMEs with the NCB, because we will not be able to offer loans once we do,” he said. .

The term of this loan product should only be used as liquidity for business operations, as opposed to consumption or personal spending.

Initially, the securities repayment period is three years and credit is granted up to 70% of the appraised value, with interest capped at a maximum of 7%.

Priscilla C. Carnegie