State-owned Thai Credit Guarantee Corporation (TCG) plans to cap bad loan guarantee coverage at 24% of the portfolio guarantee scheme (PGS) 7, below 30% under the current regime as risks are expected to fall.
If the Finance Ministry agrees with TCG's proposal, lenders will take responsibility for non-performing loans (NPLs) for the portion that exceeds 24%, said Wichet Warakul, TCG's senior executive vice-president.
The 150-billion-baht PGS7 initiative is scheduled to start in July after PGS6 lapses at the end of this month.
TCG will apply the relaxed credit guarantee requirements for the PGS7 to allow small and medium-sized enterprises (SMEs) easier access to financial institutions' loans, he said. For example, the scheme will waive the annual 1.75% fee on the guaranteed loan amount for the first year for SMEs who use a single financial account.
Given that PGS6 guarantees started slowly after being launched in late 2016, the government decided to raise the cap for NPL coverage to 30% from 23.8%. Both the government and banks jointly subsidise an annual fee of 1.75% of the loan amount for four years to attract SMEs to apply for the credit guarantee, a tool that helps them secure bank loans.
TCG will take responsibility for up to 40% of soured loans extended under the micro-entrepreneur scheme, while banks shoulder the rest, he said.
The specialised financial institution will offer credit guarantees with a range of 10,000 to 200,000 baht per micro entrepreneur borrower, and a range of 200,000 to 40 million each for SMEs under the PGS7.
TCG will also provide credit guarantee services with a maximum of 50,000 baht each to the government's welfare and subsidy beneficiaries who participate in the career development scheme, he said.
Around 18,000 welfare scheme recipients who are expected to seek loans from the Government Savings Bank are TCG's target, said Mr Wichet.
Wisudhi Srisuphan, deputy finance minister, said the Finance Ministry was considering lenient requirements for SMEs who call for credit guarantees under GGS7 and the 165-billion-baht credit guarantee to micro-entrepreneurs.
