Banking regulator, the Financial Services Authority of Thailand, said that banks have no choice but to continue with old loans in the face of a shrinking banking sector and a slowdown in the economy.
Banks have taken on more debt as the economy shrinks.
The FASA said that they are not sure whether banks will be able to meet the increased interest rates on old loans as the banking sector shrinks, especially with the economy contracting for the third straight quarter.
A report by the Financial Market Association (FMA), a group of leading financial institutions, said the number of new lending applications from banks in 2016 was 8.2 per cent higher than the previous year, which was the biggest growth rate in four years.
Bangkok-based KBS Commercial Bank, which is Thailand’s biggest lender, said it expects to see an increase in its total number of loans issued this year.
“Our lending operations are still growing at a healthy pace,” it said in a statement.
It said that the growth rate for this year was up 7.3 per cent compared with 2015.
According to the FASI, the economy contracted for the second consecutive quarter in August, dropping to 6.5 per cent.