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Loan demand expected to raise rates

Loan demand expected to raise rates

BANGKOK: Banks’ lending rates are expected to start rising in the second half of this year due to stronger loan demand prompted by the improving economy and accelerated state investment in big-ticket infrastructure projects, says TMB Bank’s chief. The forecast is based on the assumption that banks will begin raising deposit rates in the first six months of this year, starting from special deposit products, due to tighter liquidity, chief executive Boontuck Wungcharoen said.

Deposits and lending rate increases typically take place at the same time, but the incoming round of hikes in prime lending rates — minimum lending rate, minimum overdraft rate and minimum retail rate — is expected to have a lag time as the Bank of Thailand’s Monetary Policy Committee is estimated to keep the policy rate on hold at 1.5% throughout 2017, given the uneven economic recovery, he said. Some large-scale infrastructure projects, motorways in particular, are set to break ground in the second half of this year and rev up domestic loan demand, he said, adding that the banking industry’s loan growth in 2017 is expected to be higher than last year’s.

According to the Transport Ministry’s action plan approved by the cabinet last month, 36 infrastructure projects worth 896 billion baht are scheduled for investment in 2017. Some 74.1 billion baht or 8.3% of the total will be covered through the fiscal budget, with about 576 billion (64.3%) coming from loans and 197 billion (21.9%) from public-private partnerships. Some 44.8 billion baht or 5% will be from the Thailand Future Fund and the remaining 3.4 billion or 0.4% will come from income provided by the projects’ owners.