GSB to curb loan extension

State-owned Government Savings Bank (GSB) will focus on handling bad debts as its top priority this year in a bid to curb outstanding loans from turning sour.

According to GSB president and chief executive Vitai Ratanakorn, the bank has chosen to focus on preventing bad debts rather than new loan extensions this year.

“New loan extensions at this time will lead to a higher risk of bad debts,” he said. “But that doesn’t mean that we will not extend new loans. Instead, our loan extensions will focus largely on government assignments.”

However, Mr Vitai insisted GSB is still dedicated to becoming a social bank to help narrow social disparity and reduce poverty in the country and allow low-income earners to gain easier access to financial services and products.

“Our mission for this year has changed to control and prevent bad debts,” said Mr Vitai. “New loans will be extended as much as the government has assigned. We believe that by doing this, we’ll be safe this year.”

The bank expects profits after loan-loss provisions of around 18 billion baht this year, a decline from the usual profit of around 20 billion baht.

According to Mr Vitai, although this year’s profitability may decline, the bank’s existing business portfolio remains robust, especially now that the bank has set aside relatively high capital reserves to beef up its financial strength to curb rising bad loan prospects.

However, Mr Vitai admitted that GSB’s reserves for loan-loss provisions remain low compared with other commercial banks which have allocated significant sums over the last 3-4 years to strengthen their long-term financial security.

Regarding the Deposit Protection Agency’s plan to reduce the ceiling for deposit guarantee to one million baht per depositor per bank from five million baht on Aug 11 of this year, Mr Vitai said as guaranteed by the government, GSB sees no need to compete over interest in the market.

He insisted interest rates offered by GSB remain comparatively higher than those being offered by the five leading commercial banks.

GSB has total assets worth 2.8 trillion baht. The bank also has total outstanding loans worth 2.1 trillion baht, with 2.5 trillion as total deposits. GSB has a customer base of 21 million borrowers of which 61% or 12 million are classified as part of the grassroots or social banking segment.

Most of this segment is associated with bank deposits rather than loans.