Thai Financial Institutions Reduce Interest Rates to Support Faltering Economic Infrastructure
Thai Commercial Banks Slash Interest Rates in Response to Central Bank's Debt Relief Initiative as Economic Growth Falters
In an effort to support struggling borrowers and bolster a sagging economy, major Thai commercial banks are lowering their interest rates following the central bank's advocacy.
This move comes amidst Thailand's GDP growth lagging behind its Southeast Asian peers, with obstacles such as high debt, stagnant consumer spending, and declining investment hampering progress. External pressures have further compelled lenders to adopt a conservative lending approach.
The Bank of Thailand's (BoT) Q1 2025 report underscores this trend, showing commercial bank lending declining for the third straight quarter by 1.3%. Additionally, non-performing loans (NPLs) are on the rise, particularly for small and medium-sized enterprises (SMEs) and home loans.
Assistant Governor of the BoT, Suwannee Jatsadasak, confirmed that discussions are ongoing with the Finance Ministry to launch a second phase of the "You Fight, We Help" debt relief program by mid-to-late June. The existing program, which is already impacting bank profits due to banks absorbing some costs to aid debtors, is designed to provide targeted relief to financially distressed individuals and businesses.
Although Suwannee acknowledged that the latest central bank rate cut in April did not fully translate into lower lending rates, she explained that this is partly because interest rates are already at historically low levels. Nevertheless, a series of cuts since late 2024 has brought some relief, and she stressed that the reductions are primarily intended to alleviate borrowers' financial burdens rather than stimulate new lending, given the elevated credit risk among borrowers.
Meanwhile, leading Thai banks have announced specific interest rate adjustments in response to the Monetary Policy Committee's (MPC) rate cut on 30 April 2025:
- Kasikornbank (KBANK): Reduced its Minimum Lending Rate (MLR) by 0.08% to 6.97%, Minimum Overdraft Rate (MOR) by 0.15% to 6.94%, and Minimum Retail Rate (MRR) by 0.05% to 7.03%. Deposit rates were trimmed by 0.05%–0.20%.
- Krungthai Bank (KTB): Cut its MOR by 0.15% to 6.87%, MLR by 0.075% to 6.75%, and MRR by 0.05% to 7.295%. Deposit rates were also reduced by 0.075%–0.20%, effective 15 May 2025.
- TMBThanachart (TTB): Announced reductions of up to 0.15%, with MOR down by 0.15%, MLR by 0.10%, and MRR by 0.05%. Notably, TTB also increased its tTB No Fixed savings account interest rate by up to 0.40% to encourage deposits, effective 1 June 2025.
- Siam Commercial Bank (SCB): Reduced its MLR to 6.75%, MOR to 6.925%, and MRR to 7.025%.
- Bangkok Bank (BBL): Lowered its MLR to 6.75%, MOR to 7.00%, and MRR to 6.90%.
In related developments, authorities are working to revise eligibility criteria for the second phase of the debt relief program to make it easier for borrowers to qualify. The anticipated launch of the second phase is slated for June 2025, pending finalization of new conditions and Cabinet approval.
The Thai commercial banks' decision to lower interest rates is a response to the central bank's initiative, aimed at supporting struggling borrowers in the faltering economy. This move is part of a larger effort to combat obstacles like high debt and stagnant consumer spending, and to contend with external pressures. The Bank of Thailand's report indicates a declining trend in commercial bank lending, with non-performing loans on the rise, particularly for SMEs and home loans. The Finance Ministry and the Bank of Thailand are discussing launching a second phase of the "You Fight, We Help" debt relief program to provide targeted relief to distressed individuals and businesses. leading Thai banks have adjusted their interest rates following the Monetary Policy Committee's rate cut, intending to alleviate borrowers' financial burdens rather than stimulate new lending due to the elevated credit risk among borrowers.
