Its managers have been told to increase lending efficiency and reduce non-performing loans (NPLs) within a year or the board might consider shutting it down,  executive chairman Somchai Sujjapongse said yesterday.

The board met senior executives yesterday to encourage them to run the bank normally, after staff almost stopped extending new loans out of fear of possible prosecution, Somchai said.

The Finance Ministry has been investigating lending irregularities, and wrongdoing is suspected in 27 cases. Staff have been discouraged from working normally, said Somchai. He assured them they would be protected if they perform honestly, and said the board had given managers guidelines for sound lending practice.

Pongsak Chewcharat, president of SME Bank, said outstanding loans stood at Bt44 billion, while NPLs were about 35 per cent of the total credit.

NPLs have been caused largely by the failure of businesses, while some are a result of collusion between bank staff and borrowers who have the backing of politicians, according to Pongsak.

Chakramon Phasukavanich, chairman of the bank, said NPLs could be as high as 50 per cent if the central bank's loan-classification standard is applied.

He conceded that political intervention over the past four years had hurt the bank, with no clear plan set. The bank now awaits the outcome of the probe by the Finance Ministry, he said.

After that, there will be a major shake-up and some executives will be punished or even fired, he said.

Chakramon added that operation of the Bank was still important for small firms, who are usually rejected by commercial banks due to their high business risks.

But if the bank is unable to reduce NPLs, it may be shut down.

A random check by the Bank of Thailand of 90 of SME Bank's clients found that 27 of them were suspected of dressing the books or collusion with bank staff.

Wichit Chaitrong

The Nation