Local banks are easing loan criteria for customers, thanks to reduced credit risk amid signs of a local and global economic recovery.
Kasikornbank president Prasarn Trairatvorakul said the bank had begun easing its approval procedures for several sectors that have begun to show clear improvement, such as the electronics industry.
In any case, he cautioned that loan approvals would continue to be reviewed on a case-by-case basis.
But the overall improvement in economic conditions would help improve access to credit for borrowers, both in terms of loan approvals and the size of credit lines.
Kasikornbank expects the improvement in the economy to help improve loan growth in the second half, after the bank reported a 2% contraction in the first half. The bank, with outstanding loans of around 800 billion baht, maintains a 2009 loan growth target of 4% to 5% for the year compared with the end of 2008.
He said asset quality was still acceptable, albeit with a modest deterioration in the second quarter. Gross non-performing loans for the bank stood at 32.18 billion baht at the end of June, or 3.44% of total loans.
Dr Prasarn cautioned that interest rates would certainly begin to increase as the economy improved.
"Businesses should accelerate their financial adjustments before funding costs increase as the economy continues to recover," he said.
Competition for deposits has already begin to push rates higher, with a number of banks actively courting clients through special packages and promotions.
Kasikornbank currently quotes a minimum loan rate of 5.85%, against three-month fixed deposit rates of 0.65% and 12-month rates of 1%.
Dr Prasarn said money market rates adjusted ahead of policy rates, as the central bank would want to wait for a clear sign that the economy was firmly on a recovery track before adjusting rates.
"The one-day repurchase policy rate, now at 1.25%, is unlikely to increase until mid-2010," he said, adding that rates would rise as inflationary pressure builds in the economy.
Inflation could rise to 3% to 5% for 2010 due to higher oil prices and low base effects, Dr Prasarn said.
The Commerce Ministry earlier this month revised its full-year inflation forecast to -1% to 0% for 2009.
"Thai economic growth will improve quarter-on-quarter in the second half of the year," Dr Prasarn said. "Overall, we expect the economy to post a 3.5% to 4% contraction this year, after a 6% decline in the first half. We should return to positive growth in the first half of 2010, with clear signs of recovery by the second half of next year."
Apisak Tantivorawong, the president of Krung Thai Bank, agreed that lending conditions were improving with declining credit risk.
KTB, the country's second-largest bank, posted 4% loan growth in the first half of the year, compared with a broad contraction for the industry.