The Thai Bankers' Association (TBA) has discussed with regulators further easing of banks' contributions to the Financial Institution Development Fund (FIDF) as interest rates rise.
The TBA talked with the Bank of Thailand and the Finance Ministry about relaxing the FIDF fee contribution to the ministry, but related parties have yet to finalise how to do so, said Payong Srivanich, chairman of the TBA, after Wednesday's meeting of the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB).
Mr Payong did not say if the easing would be in the form of delaying the fee contribution or a gradual increase of the fee, only that there is a discussion.
The central bank requires banks to resume making contributions of the FIDF fee at a normal rate of 0.46% of their deposits from January next year, up from the existing contribution of 0.23% under relaxed measures because of the impact of Covid-19.
If the regulators allow banks to mitigate their FIDF fee contribution, banks could slow down planned interest rate increases for loans, which were triggered by the central bank's recent policy rate normalisation, he said.
FIDF fee contribution at the normal rate will raise financial costs for the banking sector as interest rates start to hike after the Bank of Thailand's policy rate increase last month amid an uneven economic recovery, said Mr Payong. Yet banks still have to continue to provide financial aid to viable but fragile customer segments, he said.
Mr Payong said fee mitigation would be in line with the central bank's policy rate normalisation and commercial banks' delayed increase in prime lending rates.
Another Bank of Thailand policy rate hike and interest rate increase by banks is expected, as the market anticipates continued high inflation.
The central bank's rate hike is expected to be gradual as it wants to support the economic recovery.
In terms of prime lending rate increases, healthy customers, especially large corporations, would be charged a higher rate, but banks would not charge fragile clients a higher rate, he said.
Banks would consider proper interest rates for weak customers on a case-by-case basis, said Mr Payong.
In a related matter, the JSCCIB meeting on Wednesday said it is also concerned about higher costs for the business sector, both operating and financial costs, because of the rising inflation rate.
The private sector asked the government to gradually increase electricity bills, which are set to rise from four baht per unit to 4.72 baht during September to December.
Businesses also proposed the increase be split into two phases to cushion against the impact of higher expenses.
On average, electricity bills represent 20-30% of total expenses in the manufacturing sector, while operating cost makes up around 30% of the service sector, particularly hotels.
The committee maintains its outlook for GDP growth in 2022 at 2.75-3.5%, assuming export growth of 6-8% and inflation of 5.5-7%.
