The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) expects to see an increase in bad loans, largely because of falling prices of major agricultural products, which is hurting farmers' debt-servicing ability.
The farm bank's non-performing loans (NPLs) stood at 5.59% of outstanding loans at the end of September, rising from 4.03% at the end of March, said president Apirom Sukprasert.
The bank wants to reduce its NPLs to 4% at the end of its financial year in March 2018 by focusing more on debt collection and restructuring soured loans.
Mr Apirom said prices of the country's main farm products including tapioca, corn, rubber and oil palm dipped this year, while rice was the major crop to see its price recover from 2106.
The softer prices of tapioca, corn, rubber and oil palm have affected farmers' debt servicing ability.
Imported crude palm oil from Malaysia has dealt another blow to Thai growers, he said, adding that these importers had originally intended to re-export to Laos, but the price there is two baht per kilogram cheaper, prompting them to sell in Thailand, adding to supply in the local market.
Mr Apirom said that the high stock of crude palm oil of 200,000 tons in Krabi, which the country's biggest production area, also weighed on the price.
"Palm oil farmers have already asked the government to subsidise the difference between palm and fuel oil to encourage electricity-generating plants to buy the former to generate power, which could reduce supply and shore up domestic prices," he said.
Moreover, some debtors who joined the two-year debt suspension scheme for farmers, which ends in March, have failed to service interest payments as required, said Mr Apirom.
BAAC's outstanding loans at the end of September jumped by 33.4 billion baht to 1.3 trillion.
He said the bank was confident that the target to increase its loan portfolio by 86 billion baht this fiscal year (April 1, 2007 to March 31, 2018) will be reachable as demand in loans always rises later in the production season.
Mr Apirom said that the loan scheme for agricultural SMEs with low interest rates of 4% will also help support the increase in overall loans.
The bank expects that loans extended to agricultural SMEs will reach 45.5 billion baht this financial year.
