Wisudhi said he did not agree with the GSB's current plan of increasing housing loans next year, as such activity is not strictly part of its lending policy.

Instead, the GSB should extend loans to the GHB - the country's largest mortgage-loan provider - which should then extend credit to home-buyers, suggested Wisudhi, who is also director-general of the Treasury Department as well as former chairman of the GHB.

The GSB would benefit through income from the interest charged on the loans to the GHB, he added.

The banks are both specialised financial institutions owned by the government. The GSB's reputation is for mobilising funds from the public, but it lacks experience in lending The GHB is the largest mortgage provider, but its capacity to mobilise savings is limited because it has few branches.

Wisudhi said it would take time for the GHB to issue securitised bonds to mobilise funds. Therefore, the easier way is to borrow from the GSB.

The GHB and GSB had earlier negotiated over a loan agreement, but were unable to finalise a deal. The GHB said the GSB demanded too high an interest rate, and insisted it could mobilise funds at a lower cost.

Deputy Prime Minister and Finance Minister MR Pridiyathorn Devakula has told both banks to improve their risk management. The GSB has cancelled some lending projects implemented to support the former Thaksin Shinawatra government's policies. However, it still runs the People's Bank, initiated by the Thaksin administration to provide credit to low-income groups.

Pridiyathorn has also asked the GSB to refinance the debts of teachers as part of the current government's education-reform policy.

Goanpot Asvinvichit, director-general of the GSB, has tried to increase the bank's lending portfolio and new financial business, departing from its traditional role as a savings bank.

He has survived the recent political turbulence, although he was brought in by the ousted Thaksin regime.

Wichit Chaitrong

The Nation