Non-performing loans (NPLs) at the state-owned Bank of Agriculture and Agricultural Cooperative (BAAC) dropped from 7.75 per cent of outstanding credit in fiscal 2002 to 5.17 per cent at the end of fiscal 2005, which ended in March of this year.

President Thirapong Tangthirasunan said that over the past four years, the bank's NPL ratio had continuously declined from 7.75 per cent of total loans in fiscal year 2002 to 7.45 per cent in 2003, 6.43 per cent in 2004 and 5.17 per cent in 2005. Unlike at other banks, BAAC's fiscal year period runs from April 1 to March 31.

Economists have complained that state-owned banks, including the BAAC, the Government Savings Bank and the Government Housing Bank, have posed risks from being government channels for populist policies.

Thirapong said Bt147.63 billion in loans, representing 90 per cent of the Bt164.06 billion due loans, were paid back to the bank. That represents an improvement from 88.6 per cent of the previous year.

"The repayment portfolio has shown a satisfactory result. Among the overall repayments, farmers in the North of Thailand repaid the loans the most, around 92.6 per cent. Farmers in the Northeast followed in second place, with 90.6 per cent," said Thirapong.

The bank's outstanding loans at the end of its 2005 fiscal year amounted to Bt421.7 billion.

Of that total, Bt345.19 billion was granted to farmers, Bt17.76 billion to agricultural cooperatives, Bt40 million to agricultural groups, Bt32.18 billion for the government's policy loans and Bt26.52 billion for other loans.

Currently, the BAAC operates 848 branches nationwide for 95.68 per cent of all agricultural households throughout the country and 938 counter units distributed throughout suburban areas, with 5.54 million households submitting loan applications.

Late last month, the bank announced its idea of giving farmer depositors shareholder status, in a bid to give them a sense of ownership as well as draw long-term funding.

Investors in the new product will receive an annual return of 3-4 per cent, plus 1 per cent in dividend payments from their shareholding status. The dividends will depend on the bank's performance.

BAAC expects to raise another Bt10 billion from the new scheme, which is awaiting approval from the Finance Ministry.