Loan clients urged to be well-prepared for higher finance costs

BANGKOK, July 16 – Loan customers, particularly small- and medium-size enterprises (SMEs), must have well-prepared business plans to cope with higher financial costs in the face of an upward interest trend, according to the Kasikorn Research Center (KRC), a leading Thai financial think tank.

Kasikorn said that major domestic commercial banks had begun raising the fixed interest rate by 0.10-0.55 per cent and the lending rate by 0.125-0.15 per cent following the Bank of Thailand (BoT) decision to increase the policy interest rate for the first time since September 2008 at the Monetary Policy Committee meeting on July 14.

The policy rate hike was probably made in response to the changing financial policy, maintaining competitiveness and the customer base, and expected economic expansion and lending growth.

The rate increase should not be influenced by the reduced financial liquidity as outstanding loans remain high.

Although the rate hike is rather small, KRC said, it gave a concrete signal that Thailand is entering into an upward interest cycle.

Commercial banks have more room for deposit and lending rate hikes in the rest of this year as the central bank continues signaling a further policy interest increase and a move to absorb liquidity in the financial system.

Under the circumstance, KRC warned, the loan clients, particularly SMEs which mostly adopt floating interest rates, should have well-prepared business plan to deal with higher financial costs efficiently in response to the upward interest trend.

Simultaneously, depositors would benefit from increased actual interest returns. (MCOT online news)