Government Savings Bank (GSB) has reduced loan interest rates for teachers and education personnel in a bid to help them escape debt more quickly.
According to Songpol Chevapanyaroj, president and chief executive of GSB, more than 280,000 teachers and education personnel have loans with GSB totalling over 200 billion baht, with the bank's normal lending rates at 6-7% a year.
To ease the burden on this group, the bank is cutting the interest rate to 3.5% until the end of 2027, he said.
After 2027, the rate adjusts to the minimum lending rate or minimum retail rate minus 2%, at just over 4%. The move is expected to shorten borrowers' repayment periods by around 9%, assuming they continue paying the same monthly amounts, said Mr Songpol.
For borrowers with non-performing loans (NPLs) or those experiencing repayment difficulties, the 3.5% interest rate is available if they resume making regular payments and return to normal loan status within three months.
However, if their loan status remains unchanged and they continue to be classified as NPLs, their interest rate reverts to 4%.
He said the objective of the rate cut is to allow borrowers to use the money they save on interest payments to reduce the principal, which significantly shortens the time they remain in debt. For example, if a loan originally has a 30-year repayment period, the repayment period could be reduced by nine years.
However, if borrowers participating in the programme subsequently default on their payments again, their interest rate will immediately revert to the rate that applied before they joined the scheme.
Registration can be completed through the MyMo app or at any GSB branch, and is open from Aug 20 until Oct 31.
The bank's NPL level remains manageable at less than 4%, said Mr Songpol.
While the interest rate reduction would cause GSB's net interest margin (NIM) to fall to 1.7-1.9%, below the level of the banking industry, the bank is prioritising assistance for financially disciplined borrowers over profits in order to help Thai education personnel achieve financial freedom in the long term, he noted.
"Although our NIM will decline, our income outlook remains strong," said Mr Songpol.
"New lending is still on track to meet our targets, while we have been able to keep NPLs at a low level."
