GSB is preparing a subsidiary for SME loans

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GSB is preparing a subsidiary for SME loans

Loan to use land as collateral

GSB plans to own 85% of the new subsidiary, with the rest held by a strategic partner. Somchai Poomlard

The Government Savings Bank (GSB) is preparing to set up a non-bank subsidiary to provide land collateral-based loans to small and medium-sized enterprises (SMEs), GSB Chairman Vitai Ratanakorn said.

He said GSB would own 85% of the subsidiary, with the rest held by a strategic partner.

The new company expects to have a capital of 1 billion baht.

The bank is expected to propose a plan for board consideration in March, Vitai said.

The non-banking activity grants loans to SMEs which place land as collateral. For this service, the interest rate is 5.99%, he said.

The subsidiary also wishes to offer loans to SMEs that place land as collateral on the basis of a contract in which the SME undertakes to transfer the land to the bank if it does not meet its repayment obligations. In such cases, GSB will provide loans equivalent to 50% of the market price of the land and offer an annual interest rate of 8.99%, Vitai said.

Going forward, the subsidiary is expected to foray into the personal loan business, he said.

Vitai said the plan to establish the subsidiary was inspired by GSB’s current plan which offers loans to SMEs to bolster their liquidity amid the protracted pandemic.

Under this loan scheme, SMEs can place land as collateral for loans and the bank grants loans equivalent to 50% of the market price. The loan does not take into account their ability to repay.

The program has granted 20 billion baht to SMEs and is in the process of granting another 10 billion.

The program began in 2020 and is expected to end next month, he said.

Vitai said many SMEs have been unable to get loans from commercial banks during the pandemic because banks consider them too risky due to low liquidity.

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