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(Bloomberg) – The Government Savings Bank, Thailand’s largest public lender, will begin accepting cars as collateral for the first time in its 107-year history, as more and more people seek cheap loans amid the worst economic crisis in history.
GSB enters a pioneering market in Thailand through Muangthai Capital Pcl and Srisawad Corp. Asset. Muangthai’s loan is 15,000 baht ($483).
GSB will set up a joint venture in early 2021, helping to avoid the potential bureaucracy of being a state-owned company, President Vitai Ratanakorn said. The bank will still be able to access its 1,000 branches and 21 million customers, he said, without identifying potential partners.
“This is an attractive loan business with a wide interest rate margin,” Vitai said in an interview at his Bangkok office. GSB corporations will offer loans at rates up to 10% less expensive than other corporations to attract new borrowers, he said.
GSB’s new company will also offer low-rate unsecured loans as a component of the government’s mandate to address income inequality, he said.
Krungthai Card Pcl, the country’s largest credit card company, has also recently started lending motorcycles and cars as collateral.
“The microfinance market is huge,” said Kittima Sattayapan, an analyst at SCB Securities Co. Even if GSB cuts rates, “we see a small possibility” that existing credit leaders will be affected, he said.
The valuation of full-service banks on the Thai Stock Exchange fell 40% last year, falling by 6.9% for Muangthai Capital and 14% for Srisawad.
Muangthai Capital President Chuchat Petaumpai said Thursday at an investor assembly that he expected a higher festival due to his company’s good fortune. Net profit for the first part of this year increased by 24% to 2.5 billion baht, with an average interest rate of 22%, according to a corporate filing.
Muangthai has about 4,500 branches and the Chuchat family’s stake is approximately $2.4 billion, according to knowledge compiled through Bloomberg.
GSB was founded through a Thai king more than a century ago and belongs to the Ministry of Finance. It has assets of around 2.8 trillion baht, according to its website. Vitai joined the GSB as president in July, having spent the last two years as general secretary of the Government Pension Fund.
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