Thai PM Nudges Lenders to Cut Rates After Central Bank Snub

(Bloomberg) -- Thailand’s Prime Minister Srettha Thavisin urged the nation’s biggest commercial banks to reduce interest rates for vulnerable groups and small businesses after the central bank repeatedly ignored his calls to lower borrowing cost from a decade-high.

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Srettha met chief executives of Bangkok Bank Pcl, Siam Commercial Bank Pcl, Kasikornbank Pcl and Krung Thai Bank Pcl in Bangkok on Tuesday to make the case for reduced interest rate for borrowers struggling to cope with high cost of funds. The prime minister told reporters that the meeting was not meant to pressure banks but to request them to consider providing relief to vulnerable groups.

Srettha’s meeting with the top lenders came after the central bank held its benchmark rate steady at a third straight meeting on April 10, ignoring calls by the premier to slash borrowing costs by 25 basis points from 2.5%. The premier and Bank of Thailand Governor Sethaput Suthiwartnarueput have clashed over the policy approach to revive Southeast Asia’s second-largest economy, which has grown at a slower pace than regional peers.

Srettha said he also discussed general economic issues and the strong financial results of banks in the first quarter during the meeting attended by SCB’s Arthid Nanthawithaya, Kasikornbank’s Kattiya Indaravijaya, Bangkok Bank’s Chartsiri Sophonpanich and Krung Thai President Payong Srivanich.

“The government recognizes the struggles of the people with rates,” Srettha said, adding the bank chiefs, known to him for 10 to 20 years, have promised to look into his request to ease borrowing costs.

Most state-owned banks in Thailand have held loan rates steady even as the central bank lifted borrowing costs by a total of 200 basis points during a yearlong tightening cycle.

The sluggish growth outlook and government-central bank clashes have rattled foreign investors, prompting them to dump more than $3 billion of Thai bonds and stocks so far this year. The baht has gone from being the best performer in Asia in the final quarter of 2023 to among the worst, so far this year after its 7.8% decline against the dollar.

The central bank expects economic growth to accelerate to 2.6% this year from 1.9% in 2023 with Srettha’s administration set to implement a 500 billion baht ($13.5 billion) cash handout program in the final quarter.

The BOT has argued that some of the problems holding back growth are structural and can’t be addressed by monetary policy, while dismissing months of negative inflation prints as a fallout of state subsidies.

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