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22 Oct 2024

Financial Institutions

Commercial banks start cutting lending rates, leading to easing financial costs in the credit market (Current Issue No.3527 Full Ed.)

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Commercial banks start cutting lending rates, leading to easing financial costs in the credit market

  • About one week after the Monetary Policy Committee (MPC) decided to lower its policy rate, several commercial banks gradually announced reductions in their loan interest rates by up to 0.25 percent, effective from the beginning of November 2024. KResearch holds the view that the lending rate cuts of commercial banks represent one of the mechanisms to transfer easing financial costs, in line with the policy rate direction, in the credit market.
  • KResearch estimates that retail and business loans likely to benefit from the reduced lending rates by the end of 2024 account for approximately 40.9 percent of total loans in the Thai banking system. The rate cuts are expected to lower interest costs for retail and business borrowers by nearly THB 1.3 billion (specific to reduced interest burden for the period of November-December 2024). The move may not trigger a change in borrowers’ monthly installment payments, but potential benefit is they will have the ability to pay off their debt sooner.
  • For full-year 2024, KResearch projects that loan growth in the Thai banking system may be no more than 1.5 percent. This is because the declining financial costs in line with a downward trend in the policy rate is just one of many factors affecting loan disbursements. Both individual borrowers and businesses are thus likely to consider other factors, especially the overall Thai economic situation and outlook, which will affect investment plans, consumption, and future debt repayment ability, before deciding to take out loans.

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