Financial Institutions in Thailand
Author: Ravi Amatayakul

THAILAND’S ECONOMY is predominantly agricultural. Rice is the leading food crop, and rubber is an important exchange earner among nonfood crops. Mineral production, which accounts for a small share of the national product, contributes sizable amounts to the country’s exchange earnings, mainly through tin exports. The manufacturing sector—although still narrow—has been expanding in recent years. The authorities have actively encouraged this expansion through tax relief and other measures. Government investment has concentrated in the field of basic services. With a view to accelerating economic development, the Government launched a Six Year Development Plan on January 1, 1961 aimed at achieving an adequate rate of growth in the face of a rapidly rising population.1


THAILAND’S ECONOMY is predominantly agricultural. Rice is the leading food crop, and rubber is an important exchange earner among nonfood crops. Mineral production, which accounts for a small share of the national product, contributes sizable amounts to the country’s exchange earnings, mainly through tin exports. The manufacturing sector—although still narrow—has been expanding in recent years. The authorities have actively encouraged this expansion through tax relief and other measures. Government investment has concentrated in the field of basic services. With a view to accelerating economic development, the Government launched a Six Year Development Plan on January 1, 1961 aimed at achieving an adequate rate of growth in the face of a rapidly rising population.1

THAILAND’S ECONOMY is predominantly agricultural. Rice is the leading food crop, and rubber is an important exchange earner among nonfood crops. Mineral production, which accounts for a small share of the national product, contributes sizable amounts to the country’s exchange earnings, mainly through tin exports. The manufacturing sector—although still narrow—has been expanding in recent years. The authorities have actively encouraged this expansion through tax relief and other measures. Government investment has concentrated in the field of basic services. With a view to accelerating economic development, the Government launched a Six Year Development Plan on January 1, 1961 aimed at achieving an adequate rate of growth in the face of a rapidly rising population.1

By far the greater part of government budget revenues consists of indirect taxes, principally customs duties and taxes on rice exports. Budget expenditures have increased at a faster rate than revenue, and recourse—though on a limited scale—has had to be had to central bank credit to finance budget deficits. The Government has taken measures to expand revenue through tax revisions and improvement of tax collection methods. The money supply has been steadily expanding, but at an average rate apparently not much higher than the rate of growth of real output. Over the last two years, the cost of living index has been stable. International reserves have been satisfactory throughout the postwar period. No par value for the baht has been established, but the exchange rate on the free market has remained stable in recent years at about B 21 per U.S. dollar.

The principal financial institutions of Thailand are (1) the Bank of Thailand (the central bank), (2) twenty-seven commercial banks of which eleven have their head offices abroad, (3) the Government Savings Bank, (4) the Industrial Finance Corporation, (5) the credit cooperatives, and (6) the insurance companies. In addition to these institutions, there are numerous small moneylenders, mainly in the rural areas. There are no stock exchanges.

Bank of Thailand


The Bank of Thailand was established on December 10, 1942, under the Bank of Thailand Act of April 28 of the same year, as the central bank of the country. The Bank’s paid-up capital of B 20 million was subscribed by the Government, and the Bank received also the net assets of B 13.5 million of the Thai National Banking Bureau, which was set up in 1939 as a precursor to the establishment of a full-fledged central bank. Subject to general policy supervision and control by the Minister of Finance, the Bank’s management is entrusted to an eleven-member Court of Directors, including the Governor and the Deputy Governor of the Bank, serving as the ex officio Chairman and Vice Chairman of the Court, respectively. The Governor and the Deputy Governor are appointed by the King on the advice of the Cabinet, and the other Directors by the Cabinet on the advice of the Finance Minister. The right of note issue rests with the Issue Department of the Bank, and domestic and foreign banking operations are under the jurisdiction of the Departments of Domestic Banking and Foreign Banking, respectively.

As bank of issue

The Bank of Thailand took over the management of the note issue from the Currency Division of the Treasury Department on December 11, 1942, and has since been issuing notes in the name of the Government. On the same date, the country’s currency reserves were transferred to the Bank’s Issue Department.

During the war and in the early postwar period, the currency reserves, required to be equal in amount to the whole currency outstanding, consisted mainly of gold, foreign exchange, and Thai Government paper, denominated both in baht and foreign currencies (Table 1); the remainder was in the form of “government guarantees.” In March 1950, Thai Government paper denominated in baht was discontinued as legal currency reserve, and, following a revaluation of gold and foreign exchange in March 1955, the government guarantees were liquidated. Thereafter, through August 26, 1958, the currency reserves comprised exclusively gold, foreign exchange, foreign securities, and Thai Government securities denominated in foreign currencies. But as these requirements came to be regarded by the authorities as too rigid, the Currency Law was amended on August 27, 1958. The amendment stipulated that a minimum of 60 per cent of the currency cover should consist of official holdings of gold, foreign exchange, and foreign securities of less than one-year maturity. The remaining 40 per cent may comprise Thai Government securities denominated in any currency, Thailand’s gold subscription to the International Monetary Fund, and commercial paper; the last of these, however, may not exceed 10 per cent of the total amount of notes in circulation. Of the 40 per cent, however, only Thai Government bonds and Treasury bills have been used as currency reserves so far. At the end of 1960, the percentage distribution of the currency reserves was as follows: gold, 33.3 per cent; foreign exchange, 41.2 per cent; Thai Government bonds denominated in U.S. dollars and pounds sterling, 10.0 per cent; IBRD dollar bonds, 1.9 per cent; and Thai Government Treasury bills, 13.6 per cent. Notes in circulation have more than tripled during the postwar period: from B 1,839 million at the end of 1945 to B 6,661 million at the end of 1960.

Table 1.

Bank of Thailand, Issue Department: Assets and Liabilities, End of Year, 1942-601

(In millions of baht)

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Sources: Bank of Thailand, Annual Reports, 1942 to 1957, and Monthly Returns.

Excluding the accumulated income from the Bank’s security holdings.

For the period up to March 1955 may include also “government guarantees” (for which data are not available), given for the part of the note issue not covered by government securities, or gold and foreign assets.

Data for 1942-45 exclude foreign exchange and securities held in the United States and the United Kingdom.

As Government’s fiscal agent

As fiscal agent of the Government, the Bank of Thailand is the principal depository of the balances of various government departments and enterprises, and of U.S. aid counterpart funds, as well as the sole depository of baht balances of the Exchange Equalization Fund (since July 1955). The total of all these balances amounted to B 3.44 billion, 82 per cent of the total liabilities of the Bank’s Banking Department in December 1960 (Table 2). In addition to balances held at the Bank of Thailand, government enterprises hold deposits at the Government Savings Bank and at several commercial banks.

Table 2.

Bank of Thailand, Banking Department: Assets and Liabilities, End of Year, 1946 and 1950-60

(In millions of baht)

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Sources: Bank of Thailand, Annual Reports, 1942 to 1957, and Monthly Returns.

Presumably includes entirely or mostly the balances of government enterprises.

Separate figures for the Banking Department’s holdings of Thai Government bonds denominated in baht and in foreign currencies are not available.

As the Bank of Thailand does not have its own branches in the Provinces, government payments and tax collections are made through the Provincial Treasuries, which act also as agents of the Bank of Thailand, for which they maintain accounts. The Provincial Treasuries are also used to some extent by commercial banks and business firms for the transfer of funds betwen Bangkok and the Provinces.

The size of balances kept by these Treasuries and the transfer of such balances to the Treasury are subject to ministerial regulations.

The Bank of Thailand is the principal lender to the Government. It holds most of the Treasury bills and government bonds. The issue of Treasury bills began in April 1945, under the Treasury Bills Act of 1944; in the past 15 years, it has constituted the largest source of borrowing for the Thai Government. The Bank has obtained these bills mainly through direct purchases, but to some extent through discounting. Part of the Bank’s Treasury bill holdings is with the Issue Department as one of the legal components of the currency cover, and the other, and larger part, is with the Banking Department. At the end of 1960, the Issue Department held B 0.9 billion of Thai Treasury bills and the Banking Department B 1.1 billion; the combined holdings of the two Departments accounted for 96 per cent of the total outstanding Treasury bills in the country. During 1960, the Government used part of the balance of the [Exchange] Stabilization Account to retire Treasury bills; as a result, the outstanding amount of such bills held with the Banking Department fell from B 2.3 billion at the end of 1959 to B 1.1 billion at the end of 1960. The remaining balance in this Account was utilized to write off the amount of the Bank’s overdrafts to the Government outstanding as at November 30, 1960. Treasury bills normally mature in four months; the interest rate on them, after remaining at 2.9 per cent for many years, was raised in October 1960 to 4½ per cent.

Beside providing short-term financing to the Government through purchases of Treasury bills, the Bank of Thailand used to extend overdraft facilities to the Government; however, under the Government Budget Procedures Act of October 1959, this method of financing was discontinued after November 1960. The interest rate on these overdrafts was 2½ per cent per annum. The outstanding amount of the overdrafts on November 30, 1960 was B 540 million, 15 per cent of the total assets of the Bank’s Banking Department of that date.

During the war, and in the subsequent period through 1948, the Bank of Thailand provided considerable financial accommodation to the Government by subscribing to the bulk of various government bond issues. In 1949, 1950, and through July 1951, no new government bonds were issued; but in August 1951, issues were resumed and by the end of 1960 eleven additional series had been floated, six denominated in baht and five in foreign currencies. (Of the bond series denominated in baht, four bear interest at 8 per cent per annum, one at 6 per cent, and the other at 4½ per cent; one of the bond series denominated in foreign currencies carries interest at 6 per cent, three at 3½ per cent, and one at 3 per cent.) The Bank of Thailand has held a large part of the government bonds that it has obtained not only through direct purchases but also, to a limited extent, through purchases from other holders (financial institutions, government enterprises, and private persons). In December 1960, the Bank’s holdings of government bonds amounted to B 2.48 billion (B 0.68 billion held in the Issue Department and B 1.80 billion in the Banking Department), i.e., about 58 per cent of the total amount outstanding, compared with 73 per cent in December 1945.

As fiscal agent for the Government, the Bank of Thailand manages the internal public debt and administers most of the external public debt.

As bankers’ bank and controller of credit

Through 1958, the Bank of Thailand played a very limited role as a supplier of credit to other banks. Since then, the amount of such credit has expanded considerably, but it still accounts for only a small proportion of the total assets of the Bank’s Banking Department; as at the end of 1960, total advances to and rediscounts for commercial banks amounted to B 0.23 billion, about 5 per cent of the Banking Department’s total assets (Table 2). An important reason for the limitation on the Bank’s role as a bankers’ bank has been the fact that, so far, commercial banks have themselves relied little on central bank credit for their operations. Both the local and foreign banks operating in Thailand enjoy considerable borrowing facilities from banks abroad. Also, it is reported that some commercial banks have considered the rules and requirements for obtaining credit from the Bank of Thailand rather strict and rigid.

The Bank of Thailand’s transactions with other banks consist principally of rediscounting commercial paper (chiefly export bills) and Treasury bills, and of repurchases of government bonds. Most of the rediscounting business is highly seasonal in nature, reflecting the financing of rice, rubber, corn, and other exports. The Bank has also provided direct loans to banks on a restricted scale, mainly against the collateral of government bonds. In December 1960, the Bank authorized the use of rice warrants issued by the Public Warehouse Organization as collateral for loans. Further, from May 8, 1961, the Bank started rediscounting promissory notes issued by exporters against sale contracts.

For a few years after its establishment in December 1942, the Bank’s standard interest rate on direct loans to other banks was 4½ per cent per annum; but on February 23, 1945, the rate was raised to 8 per cent and it has not been changed since that date. In February 1945, the Bank also established rediscount rates of 4½ per cent for Treasury bills and 7 per cent for commercial bills. In October 1959, the rediscount rate for export bills was reduced to 5 per cent, with a view to promoting exports. On October 17, 1960, the rediscount rate for Treasury bills was increased from 4½ per cent to 4¾ per cent; this new rate applies to Treasury bills issued on or after that date and maturing on or after February 17, 1961. In respect of government bonds, the Bank stands ready to repurchase on behalf of the Government the 8 per cent, tax-free, 15-year bonds at a schedule of prices which vary according to the length of time for which the bonds have been held. The net yields that this schedule provides range from none if the bond has been held for less than six months to 7½ per cent if the holding period is from nine to ten years.

In 1945, a Clearing House was established at the Bank of Thailand and all commercial banks are now members. The volume of transactions through this Clearing House has grown considerably; in 1960 it averaged B 4.1 billion a month.

As controller of bank credit, the Bank of Thailand played an active role during the war and through 1946; since then its role has lessened considerably. During the early years of the war, the credit control provisions of the Bank of Thailand Act and the Commercial Bank Law of 1937 proved inadequate in the context of the rapid rise in note circulation. Consequently, under an Emergency Credit Decree of June 1943, the Bank of Thailand was authorized to prescribe minimum reserve ratios for commercial banks against their deposit liabilities within a range of 9 per cent to 45 per cent. The Decree also required commercial banks that did not maintain at least a 40 per cent cover against their deposit liabilities in the form of government securities to obtain special permission from the Bank of Thailand before undertaking any lending or investment operations, and it empowered the Bank to exercise strict control over the lending and investment operations of all other financial institutions. In September 1943, this Decree was replaced by an Emergency Credit Control Act incorporating the provisions of the Decree in a modified form. For example, under the Credit Control Act, the upper limit of the legal reserve requirement was lowered from 45 per cent to 25 per cent.

Following the abrogation, in November 1946, of the 1943 Credit Control Act, the credit control exercised by the Bank was greatly relaxed. However, invoking a provision of the Commercial Bank Act of 1945 which had not been used before, the Bank of Thailand set, on November 21, 1946, a 10 per cent minimum reserve requirement for all commercial banks, including foreign banks operating in Thailand. Half of these statutory reserves were required to be maintained in the form of deposits with the Bank of Thailand and the other half in notes and coins. These reserve regulations have not since been changed. So far, cash reserves of all banks taken together have always averaged higher than the statutory reserves, but by a margin which has declined progressively; by the end of 1960, cash reserves were about 4 percentage points above the statutory minimum of 10 per cent.

The Bank of Thailand Act and the Commercial Bank Act do not contain specific provisions regarding over-all credit ceilings or selective credit controls. However, an amendment to the Commercial Bank Act, approved by the Cabinet in November 1960 and submitted for final approval to the Constituent Assembly, empowers the Bank to introduce certain selective credit controls, such as regulating the composition of commercial banks’ assets, imposing credit ceilings on various types of loan, fixing different interest rates charged to various categories of bank borrowers, and introducing margin deposit requirements in respect of letters of credit. This amendment also requires the foreign banks in Thailand to set aside special reserve funds, in order to protect the interests of their depositors in Thailand.

Commercial Banks

Modern commercial banking in Thailand dates back to 1888, when the first branch of a foreign bank, the Hong Kong and Shanghai Bank, was established in Bangkok. In the next 50 years, banking development was limited; by 1938 there were only 11 banks, 4 branches of foreign banks and 7 locally incorporated national banks. At present, there are 27 banks—16 national and 11 foreign2—and these banks have 293 branches. The geographical distribution of bank branches is as follows: Central Provinces (including Bangkok), 122; Eastern Provinces, 18; Northeastern Provinces, 27; Northern Provinces (including Chiengmai), 57; and Southern Provinces, 69. The present total of 320 bank offices, head offices and branches together, compares with only 52 in 1959; in the opinion of the Thai authorities, the number of branches opened in recent years has been excessive in some areas. The proposed amendment to the Commercial Bank Act, mentioned above, seeks to control the establishment of new branches in order to ensure a better geographical distribution.

Banking legislation and control

The Thai commercial banks, originally organized along the lines of British banks, are governed by the Commercial Bank Act of 1945, which replaced a 1937 Act for the Control of the Business of Banking. The 1945 Act requires all banks to be registered and to operate under licenses issued by the Minister of Finance. The Council of Ministers has stipulated a minimum capital of B 10 million for locally incorported banks, but there is no corresponding stipulation for foreign banks. The national banks are also required to set aside 15 per cent of their net annual profits as reserve funds until such funds reach at least 60 per cent of their paid-up capital, and to restrict annual dividends declared by them to a ceiling of 15 per cent of the paid-up capital. In the absence of any specific provisions, foreign banks are not subject to minimum capital or special reserve fund requirements and dividend limitations. Such requirements would be introduced, however, by the pending amendment to the Commercial Bank Act.

The Commercial Bank Act empowers the Bank of Thailand to prescribe to commercial banks cash reserve ratios varying between 9 per cent and 20 per cent of their deposits. It also prohibits banks from making loans against the collateral of their own stock, and from investing in shares or debentures of another company amounts exceeding 20 per cent of the paid-up capital or 10 per cent of the paid-up capital plus total reserves of that company. Furthermore, all immovable properties that may come into the possession of banks in connection with the liquidation of any of the loans granted by them must be disposed of within a period of nine years; any extension of this period requires approval by the Minister of Finance.

Bank operations

From December 1952 to December 1960, demand deposits of commercial banks tripled (Table 3), reflecting a rapid expansion of trade and credit and the growth of banking facilities as well as some monetary inflation. Time deposits rose from B 117 million (less than 10 per cent of demand and time deposits) in December 1952 to B 1,223 million (almost one fourth of demand and time deposits) in December 1960. In that period, the cash/deposit ratio of commercial banks fell from 32 per cent to about 14 per cent. No analysis of the ownership of bank deposits is available. The law permits the banks to pay up to 4½ per cent per annum as interest on demand deposits; but in practice, most banks do not pay any interest, and the few that do pay interest pay only about ½ per cent or 1 per cent. However, some banks pay interest up to 4 per cent on certain special demand deposit accounts which are subject to restrictions on the number of checks that may be drawn in a month. As for time deposits, the maximum permissible interest rates are 5 per cent per annum on deposits held for six months and 5½ per cent on deposits held longer; in actuality, these deposits generally earn interest at about 2 per cent per annum.

Table 3.

Thailand, Commercial Banks: Assets and Liabilities, End of Year, 1952-60

(In millions of baht)

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Source: Data provided by the Bank of Thailand.

Includes holdings of private shares and bonds in the years 1952-56.

In addition to deposits, the significant source of loanable funds of the commercial banks has been foreign credits. The volume of such credits has increased appreciably since December 1952; by December 1960, it amounted to B 0.9 billion, about 12 per cent of the banks’ total liabilities. A large part of the borrowings abroad comprises loans obtained from their head offices by branches of foreign banks operating in Thailand.

At the end of 1960, total capital accounts of all commercial banks amounted to B0.6 billion, about 7 per cent of total liabilities—a decrease from the figure of about 12 per cent for December 1952.

Loans, overdrafts, and discounts of commercial banks rose from B 1.1 billion in December 1952 to B 5.0 billion in December 1960, the increase being more rapid for national banks than for foreign banks. For the Thai banks, overdrafts and loans have been of far more importance than discounting. Prior to 1952, the banks did little or no discounting, but since then the volume of such operations has expanded considerably; by December 1960 the outstanding amount of bills discounted (B 1.2 billion) represented 24 per cent of the combined amount of loans, overdrafts, and discounts.

Financing of foreign trade has always been an important outlet for the available funds of the commercial banks; at the end of June 1960, it accounted for B 1.4 billion, which was 40 per cent of total bank credit to the private sector, compared with 37 per cent at the end of December 1952 (Table 4). Loans for domestic commerce represented 15 per cent of the total (22 per cent in December 1952); loans to the construction industry, 8 per cent; and other domestic loans, 37 per cent. Loans to government enterprises, included among “other,” have been relatively small. Financing of foreign trade is especially important for the foreign banks, which provide only limited accommodation for other economic activities, including domestic commerce. There is a legal ceiling of 15 per cent on the interest rates chargeable by the banks on their loans and overdrafts; actually, these rates normally range from 12 per cent to 15 per cent. In respect of some loans, however, the prevailing interest rates are lower, but not below 8 per cent per annum.

Table 4.

Thailand, Commercial Banks: Principal Categories of Loans and Overdrafts to Private Sector, End of Period, 1952-June 1960

(In millions of baht)

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Sources: Bank of Thailand, Annual Reports, 1952 to 1957, and Current Statistics, December 1960.

Includes loans for “transport and communications.”

Included under loans for “agriculture and fisheries” and “mining.”

Includes loans to insurance companies, personal and professional loans, and relatively small amounts of loans to government enterprises.

Data differ slightly from those in Table 3.

The bills discounted by the banks are largely foreign trade bills—in particular, rice export bills because of the predominant position of rice exports in the country’s total exports. No detailed classification of bills discounted is, however, available. The discount rates usually range from 7 per cent to 9 per cent, subject to the stipulated margins between the Bank of Thailand’s rediscount rates and the banks’ own discount rates; the maximum legal discount rate is 15 per cent.

The banks’ investment portfolios are small and consist principally of government bonds. At the end of December 1960, government bond holdings amounted to B 395 million, an expansion of B 304 million in the eight years from December 1952 (Table 3). The banks’ Treasury bill holdings are also very small, amounting to only B 23 million in December 1960.

During the postwar period, cash reserves of commercial banks increased relatively little, rising from B 471 million in December 1946 to B 739 million in December 1960. During the same period, the rate of increase in deposits was more rapid; as a result, the ratio of cash to deposits declined progressively from a peak of 59 per cent in December 1946 to 14 per cent at the end of 1960. These figures represent the average of cash reserve ratios for all banks; for certain banks, reserves have at times been below the statutory minimum. For foreign banks, the decline in cash reserve ratios was more pronounced than for the national banks.

Government Savings Bank

The Government Savings Bank was established in 1946 under the Government Savings Bank Act of the same year; it took over the assets and functions of the Postal Savings Bank system, which had been in existence since 1913. In addition to performing the functions of a regular savings institution, it accepts current deposits, floats its own bonds, rediscounts negotiable instruments, sells domestic travelers checks, and transacts a limited amount of insurance business (mainly incidental to certain of its own loan operations). The Bank has about 300 branches distributed throughout the country, including some local post offices which still act as its agents. The branches can, however, only collect savings; loans are made only by the Head Office in Bangkok. The Bank’s management rests with a Board of Directors, seven of whom are appointed by the Minister of Finance. All major transactions of the Bank need prior approval of the Ministry of Finance.

Deposits and sales of its own bonds are the principal sources of the Bank’s loanable funds (Table 5). Other resources are small, comprising an initial capital of only B 100,000, insurance premiums receivable, and reinvested profits. The Bank’s deposits have expanded considerably, from B 0.2 billion in December 1947 to B 1.3 billion in December 1960, about a sixfold increase. The Bank accepts both current and fixed deposits from commercial banks, other financial institutions, government and private organizations, business firms, and individuals. Current deposits from parties other than banks constitute the largest proportion of the Bank’s deposit business; in September 1960, they amounted to B 0.75 billion, about 62 per cent of total deposits (later data are not available). These deposits, known as “at-call deposits,” earn interest at 2 per cent per annum on individual accounts up to a maximum of B 50,000. Current deposits by banks, earning ½ per cent interest, amounted to B 0.19 billion, about 16 per cent of total deposits, in September 1960. Total fixed deposits other than those of banks, bearing 3 per cent interest on amounts up to B 300,000 in each account, totaled B 0.25 billion in September 1960, about one fifth of total deposits. Fixed deposits of banks carrying interest rates of either 2, 3, or 5 per cent are negligible. All fixed deposits are withdrawable only on six months’ notice. All the deposits taken together represented about 75 per cent of the Bank’s total liabilities in December 1960 (about 93 per cent in December 1947). The Bank’s deposit liabilities are guaranteed by the Government.

Table 5.

Thailand, Government Savings Bank: Assets and Liabilities, End of Period, 1947-60

(In millions of baht)

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Sources: Bank of Thailand, Current Statistics, December 1960; Office of the National Economic Development Board, Thailand Central Statistical Office, Statistical Yearbook, 1945 to 1955; Thai Government Gazette.

The Bank’s bonds are of two types: ordinary bonds bearing 4 per cent interest, and the “Special Savings Tickets” or “Premium Bonds” which earn only 1 per cent. Despite their much lower straight interest yield, the premium bonds have proved far more attractive than the higher interest bearing ordinary bonds. This is due to the fact that the premium bonds have special lottery features under which, in frequent periodic drawings, the holders of winning bond numbers receive attractive cash prizes. There is no restriction on the number of times that a premium bond holder may win a prize during the lifetime of the bond. In September 1960 (later data not available), the amount of premium bonds outstanding was B 153 million, compared with only B 7 million of ordinary bonds.

A substantial proportion of the Savings Bank’s assets has comprised loans to government enterprises and investments in government bonds; loans made available to the private sector have been of limited amount. At the end of 1960, the Bank’s loans amounted to B 0.8 billion, about 50 per cent of its total assets. According to the latest data on the classification of loans by principal categories of borrowers (Table 6), about 31 per cent of the total loans outstanding at the end of June 1960 were for various public utilities, approximately 14 per cent for housing projects, about 13 per cent for the cooperatives, 12 per cent for industries, and 9 per cent for public transportation services. There were also some loans to individuals and business firms. Loans to the cooperatives and to government enterprises are guaranteed by the Government. Home construction loans are required to be secured by life insurance issued by the Savings Bank itself, and also by fire insurance sold by other insurers. Loans are available for periods up to 20 years, and usually carry interest rates of 4 or 5 per cent per annum.

Table 6.

Thailand, Government Savings Bank: Loans by Principal Categories of Borrowers, End of Period, 1956-June 1960

(In millions of baht)

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Source: Data provided by the Bank of Thailand.

The Savings Bank’s investments in government bonds and Treasury bills amounted to B 0.4 billion, about 26 per cent of its total assets, in December 1960. Between December 1947 and December 1955, these holdings had declined progressively from B 0.15 billion to B 0.04 billion, but subsequently they increased substantially. The increase after 1956 apparently reflected a new line of policy involving greater use of the Bank’s funds by the Government. However, investment by the Bank in government bonds is not statutory.

The Savings Bank also offers to commercial banks facilities for rediscounting commercial bills, but this operation has never been large. Beside obligatory life insurance required by the Bank with respect to all its real estate loans, the Bank provides life, disability, and endowment insurance facilities to its depositors for amounts as low as only B 200 (about $10).

The Savings Bank’s cash reserves are about 11 per cent of its total assets, and consist mainly of the balances with other banks; the remainder covers cash on hand and balances with Provincial Treasuries.

Agricultural Credit Institutions

Although Thailand is predominantly an agricultural country, financial institutions specializing in agricultural credit are little developed. About 90 per cent of all credits used by farmers are obtained, generally at usurious interest rates, from village shopkeepers, landlords, moneylenders, merchants, and relatives. In some cases, these lenders borrow money from commercial banks and in turn make loans to farmers. Other suppliers of agricultural credit include cooperative societies and government agencies. There is hardly any direct financing of the rural credit needs by commercial banks.

Cooperative societies

The cooperative movement in Thailand began in 1917, but, so far, has shown limited progress. The movement has developed with a preponderant bias in favor of rural credit societies; but even so, because of their meager resources, the latter have to date played a minor role in financing rural credit needs, supplying only about 8 per cent of these requirements. The cooperative societies, organized under the Cooperative Societies Act of 1928, have a simple pyramidal structure. At the base of the pyramid are the primary cooperatives; at a higher layer are the two provincial cooperative banks; and at the apex is the Bank for Cooperatives.

Primary cooperative societies

At the end of 1958, there were 9,932 operating credit societies, with a total membership of about 195,000, and 710 mainly or entirely non-credit societies. The share capital of the credit societies has been negligible, and their resources have consisted mainly of loans from the Bank for Cooperatives and the provincial cooperative banks; these amounted to 76 per cent of their total liabilities at the end of 1958 (Table 7). These borrowings bear an interest rate of 7 per cent per annum. Deposits from members have been small. At the end of 1958 they were less than 6 per cent of total liabilities, and reserve funds were about 16 per cent of the total. The greater part of the societies’ assets at that date consisted of loans to members, which amounted to B 296 million, about 84 per cent of total assets.

Table 7.

Thailand, Agricultural Cooperative Credit Societies: Number of Societies and Consolidated Balance Sheets, End of Year, 1955-58

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Sources: A Report on Agricultural Credit; Cooperative Organization, Management, and Administration; and Agricultural Marketing in Thailand (prepared for the Government of Thailand and the U. S. Operations Mission to Thailand, November 1959); some unpublished material.

Loans from the provincial cooperative banks and the Bank for Cooperatives.

Includes the so-called “Common Good Fund.”

The credit societies make loans only to their members. These loans have maximum maturities of 10 years, carry interest rates of 8 to 10 per cent per annum, and are usually extended for capital or semi-capital purposes relating to the purchase and improvement of land, purchase of draft cattle and agricultural implements, building construction, and improvements; only to a limited extent are they furnished for current production or for personal needs. Refinancing loans are common. In 1958, the latest year for which data are available, new loans by the societies totaled B 43 million, averaging B 239 (US$11) per member. The percentage distribution of these loans by principal purposes was as follows:

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Despite the principle of unlimited liability of the members, generally cautious loan policies of the societies, and legal provisions for foreclosing mortgages, there is a considerable incidence of arrears in loan repayments. It is understood that supervision over the use of loans by the members is not adequate.

Provincial cooperative banks

The two provincial cooperative banks, Uttaradit and Chiengmai, are government-sponsored institutions, but the Government has no ownership interests in them. Both were set up in 1951. The Uttaradit Bank began to operate in 1952 with an authorized capital of B 400,000. At the end of 1958, however, only B 188,000 of the Bank’s capital was subscribed—B 180,000 by the cooperative societies and the rest by individual members. The Bank constitutes an important source of credit to the primary cooperatives in Uttaradit Province. The principal sources of its loanable funds are loans from the Bank for Cooperatives and counterpart funds; to a smaller extent, it is also financed from its own capital and reserves and the demand and fixed deposits of its members. The Bank has declared a 6 per cent dividend on its stock every year since 1953. The Chiengmai Bank, organized along the same lines as the Uttaradit Bank, has an authorized capital of B 600,000, most of which has been subscribed. It has also declared a 6 per cent dividend from year to year.

Bank for Cooperatives

This Bank was set up in 1947 under the provisions of the Bank for Cooperatives Act of 1943. Its authorized capital of B 10 million has been fully subscribed. At the end of 1959, B 4.5 million of the capital stock was owned by the Ministry of Cooperatives and B 5.5 million by other cooperative societies. In earlier years, the Government’s participation in the Bank’s capital stock was much larger, being as high as B 9.2 million in December 1947. Since then, a considerable part of the stock held by the Government has been gradually retired as the cooperative societies themselves have become increasingly able to enlarge their own participation in the Bank’s stock. The Bank is the central financing institution for all the cooperative societies, including the two provincial cooperative banks.

At the end of 1959, about 70 per cent of the loanable funds of the Bank for Cooperatives was obtained from borrowings from the Government Savings Bank (36 per cent) and the Ministry of Finance (34 per cent). As shown in Table 8, the remainder was derived as follows: from government loans in the form of government-subscribed cooperative bonds (4 per cent), deposit accounts (10 per cent), loans from counterpart funds (1 per cent), and various capital accounts, including mainly the paid-up capital and reserve funds. The cost of borrowing by the Bank has averaged about 4.3 per cent per annum.

Table 8.

Thailand, Bank for Cooperatives: Balance Sheet, End of Year, 1947 and 1956-59

(In millions of baht)

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Sources: A Report on Agricultural Credit; Cooperative Organization, Management, and Administration; and Agricultural Marketing of Thailand (prepared for the Government of Thailand and the U. S. Operations Mission to Thailand, November 1959); some unpublished material.

The Bank makes loans only to cooperative societies for periods up to 10 years, at interest rates between 6 and 7 per cent per annum; the latter in turn lend the money to their own members at 10 per cent per annum. These loans account for most of the Bank’s assets (87 per cent in December 1959). Between its establishment in 1947 and the end of 1959, the Bank’s new loans (exclusive of renewals) amounted to B 527 million (B 28 million in 1959). At the end of this period, the amount of loans outstanding was B 270 million, of which B 260 million was for primary cooperative credit societies, B 8 million for the provincial cooperative banks, and B 2 million for other cooperatives. Cash reserves accounted for about 12 per cent of total assets. The Bank has always earned net profits, and it has declared dividends ranging from 1 per cent in 1947 to 8 per cent from 1956 to 1959.

Other institutional sources of agricultural finance

Other institutional suppliers of rural credit are the Tobacco Monopoly, the Government Sugar Factory, and the Ministries of Agriculture and Interior. In addition, several agencies of the Ministries of Agriculture and Interior have administered various programs involving extension of limited credit to farmers. As mentioned above, there is hardly any direct financing of rural credit needs by commercial banks, but occasionally credits are given by them to large landowners against exceptionally good collateral. The commercial banks, however, give considerable loans to processors and traders of agricultural commodities, a part of which, of course, finds its way to the agriculturists.

Industrial Finance Corporation

The Industrial Finance Corporation (IFC), set up in November 1959, has replaced and taken over the business of the former Industrial Bank. That bank, established in 1952 with a capital of B 20 million subscribed entirely by the Government, had by mid-1953 so overextended its available funds and incurred such heavy losses that it ceased to function as an industrial bank. It continued to operate as a commercial bank until October 1959, when it was wound up.

Like its predecessor, the IFC aims at assisting privately owned small or medium-sized new or existing industries which are engaged in manufacturing consumer goods with local raw materials, and at promoting industrialization in general through the encouragement of greater participation of domestic and foreign private capital. It may give technical advice, grant medium-term and long-term loans, participate in the share capital of other companies, underwrite new issues of shares, guarantee loans extended by third parties, and provide reinvestment facilities to others by selling all or portions of its own industrial investments. Its authorized capital is B 20 million, of which B 6.1 million has been subscribed in the following proportions: 60 per cent by Thai commercial banks, 33 per cent by foreign banks and business firms, and 7 per cent by Thai companies and individuals. The IFC has also received a 20-year interest-free loan of B 15 million from the U.S. International Cooperation Administration and a long-term interest-free loan of B 12 million from the Thai Government. Since its establishment, the Corporation has made four loans of about B 4 million for the purpose of expansion and modernization of plant facilities.

A four-man Board of Directors, appointed by the Minister of Finance, is now entrusted with the Corporation’s management. However, the Board membership is to be increased by the addition of two directors to be elected by the shareholders. Each of the two elected directors must either hold at least B 10,000 of the Corporation’s stock or be a representative of companies or partnerships holding an equivalent amount of stock.

Insurance Companies

There has been only limited development of insurance business in Thailand, and very little information is available about the nature and extent of this business. All the insurance companies currently operating are private companies, government participation in insurance activity being indirect and confined to the limited insurance business transacted by the Government Savings Bank.

Prior to World War II, the little insurance business that existed in the country was almost entirely in the hands of branches of foreign insurance companies. During the war, these foreign companies lost their business in Thailand, thus paving the way for the mushrooming of several domestic companies. Foreign companies resumed operations after the war, but the expansion of their business has been outstripped by the increase in the volume of business of the locally incorporated companies. In 1957, the latest year for which information is available, there were 117 insurance companies operating in Thailand, 64 incorporated locally and 53 abroad. No other data are available concerning these companies. It is, however, known that a greater part of the insurance business in Thailand is life insurance, although fire insurance is also significant. While it is known that the insurance companies finance housing and other real estate development, specific information about these activities is not available.

Under the existing law, the only regulations on insurance companies in Thailand stipulate a minimum for the paid-up capital and impose compulsory security deposit requirements; these are applicable equally to both the local and foreign companies. The minimum paid-up capital requirements for various companies are as follows: life insurance only—B 1.5 million; life insurance plus other insurance—B3 million; only one kind of nonlife insurance business—B 1 million; and more than one kind of nonlife insurance—B 2 million. The minimum amounts which must be deposited with the Government as security deposits are B 1 million for life insurance companies, B 500,000 for fire insurance companies, or marine and freight insurance companies, B 800,000 for fire and marine and freight insurance companies, and B 250,000 for accident insurance companies. These deposits may be in the form of cash, Thai Government bonds, or bonds of the International Bank for Reconstruction and Development, as specified by the Government.

All insurance companies are licensed. There are no restrictions on their premium or dividend rates, or on their loans or investment policies. They are subject to a stamp duty on new policies, a tax on premiums received, and a tax on dividends distributed. For tax as well as all other purposes, the local and the foreign companies are treated alike.

Other Publications

Balance of Payments Yearbook

Volume 13 of the Balance of Payments Yearbook series is being published monthly in loose-leaf form. It will contain basic statistics, with explanatory notes, for the years 1956-60 and will provide a comprehensive record of the international transactions of some 75 countries. For the majority of countries, regional details of the basic data for 1960 will be shown; figures for the first halves of 1960 and 1961 will be given for the countries that report such data. In addition, Volume 13 will contain summary statements for the individual countries, expressed in U.S. dollars and covering several years. The analytic material in Volume 12 and earlier volumes will be brought to date, and new analytic statements will be added. The first loose-leaf sections were issued in June 1961, and the last will probably be issued in May 1962.

Volume 13 introduces a new form of basic presentation designed to make the statistics more readily usable for balance of payments analysis and to increase their comparability with national account and sector finance statistics. Since Volume 12 also covers data for 1956-59, a comparison of the figures for these four years in the new and old forms of presentation may easily be made. The provisional statements providing the latest data available are being continued as a feature of the Yearbook.

For Volumes 12 and 13, the subscription price is US$7.50 a volume; a binder for filing the loose-leaf sections may be purchased for US$3.50.

International Financial Statistics

This monthly publication of the International Monetary Fund is a standard source of statistics on all aspects of domestic and international finance. Issues are about 300 pages each. They present for most countries of the world current data useful for analyzing international payments and problems of inflation and deflation. Among the data included are exchange rates, gold and foreign exchange holdings, and the monetary system’s assets and liabilities including the money supply; also international trade, prices, production, government finance, and interest rates. In addition, data are presented in international tables, giving area and world aggregates.

Charts for the various countries show recent changes in important series; the scales for the charts are selected in order to facilitate comparison between all the charts for one country and between similar data for the various countries. Many issues also carry feature charts and articles.

The subscription rate for one year (12 issues and an annual supplement) postpaid is US$10.00; schedules of the equivalent in other currencies will be furnished on request. The price quoted covers regular mail; the publication will be sent by airmail if desired, at the expense of the subscriber. Single copies may be purchased for US$1.50.

Address orders to

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International Monetary Fund

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Mr. Amatayakul, economist in the Western Pacific Division, is a graduate of Far Eastern University, Manila, Philippines and George Washington University, Washington, D.C. He was formerly with the Audit Council under the Prime Minister’s Office of the Government of Thailand

Mr. Pandit, economist in the South Asia Division, is a graduate of Bombay University.


Editorial Note. Discussions between member countries and the staff of the Fund take place against a background of detailed information about the members’ economies compiled by the Fund staff. This information includes data on financial institutions which, it is believed, in some cases may be of general interest because not otherwise available, and may assist research workers in analyses. The present article is representative of this aspect of the work of the Fund’s staff. Further articles of a similar nature may be published from time to time.


The Thai banks, all of which have head offices in Bangkok, are the following: the Agricultural Bank, the Military Bank, the Bank of Asia for Industry and Commerce, the Bank of Ayudya, the Bangkok Bank, the Bangkok Bank of Commerce, the Bangkok Metropolitan Bank, the Laem Thong Bank, the Provincial Bank, the Siam City Bank, the Siam Commercial Bank, the Thai Danu Bank, the Thai Farmers’ Bank, the Thai Development Bank (formerly Tan Peng Chon Banking Co.), the Union Bank of Bangkok, and the Wang Lee Chan Bank. Banks incorporated abroad (head offices indicated in parentheses) are The Bank of America (San Francisco), the Bank of Canton (Hong Kong), the Bank of China (Taipei), Banque de l’Indochine (Paris), the Chartered Bank (London), the Hong Kong and Shanghai Banking Corporation (Hong Kong), the Indian Overseas Bank (Madras), the Mercantile Bank Ltd. (London), the Nationale Handelsbank N.V. (Amsterdam), the Sze Hai Tong Banking and Insurance Co. (Singapore), and the Mitsui Bank Ltd. (Tokyo).