Government Savings Bank (GSB) is preparing to set up a non-bank subsidiary to provide loans based on land collateral to small and medium-sized enterprises (SMEs), says GSB president Vitai Ratanakorn.
He said GSB would own 85% of the subsidiary, with the rest held by a strategic partner.
The new business expects to have capital of 1 billion baht.
The bank is scheduled to propose a plan for the board's consideration in March, Mr Vitai said.
The non-bank business provides loans to SMEs that place land plots as collateral. For this service, the interest rate is 5.99%, he said.
The subsidiary also wants to offer loans to SMEs that place land plots as collateral based on a contract that has the SME agree to transfer the land to the bank if they fail to meet repayment obligations. In such cases, GSB will provide loans equivalent to 50% of the land's market price and offer an annual interest rate of 8.99%, said Mr Vitai.
In the future, the subsidiary is expected to make a foray into the personal loan business, he said.
Mr Vitai said the plan to establish the subsidiary was inspired by GSB's current project that offers loans to SMEs to shore up their liquidity amid the prolonged pandemic.
Under this loan project, SMEs can place land as collateral for loans and the bank provides loans equivalent to 50% of the market price. The loan does not take into account their repayment ability.
The scheme has extended 20 billion baht to SMEs and is in the process of granting another 10 billion.
The programme began in 2020 and is slated to end next month, he said.
Mr Vitai said many SMEs could not secure loans from commercial banks during the pandemic because banks view them as too risky based on their low liquidity.