Thai Banks Lower Lending Rates After Central Bank Rate Cut

Thai banks, led by Bangkok Bank, have started cutting lending rates following the central bank's move to slash the benchmark policy rate to its lowest in over two years. The rate cuts aim to support the economy hit by US tariffs and help customers adapt to global challenges. The Bank of Thailand has signaled an accommodative monetary policy stance, with Governor Vitai Ratanakorn set to chair his first rate meeting on Oct. 8.

Title: Thai Banks Cut Lending Rates Amid Central Bank Rate Reduction

Thailand's top banks, led by Bangkok Bank, have started reducing lending rates in response to the Bank of Thailand's (BOT) decision to lower the benchmark policy rate to its lowest level in more than two years. This move aims to support the economy, which has been impacted by U.S. tariffs and other global challenges. The BOT's accommodative monetary policy stance signals a shift in focus towards growth support, with the new governor, Vitai Ratanakorn, set to chair his first rate meeting on October 8.

The benchmark policy rate, known as the BOT rate, was reduced by 25 basis points to 1.50% on Wednesday, August 14, 2025. This reduction brings the total cuts to 100 basis points since October 2024, marking the first time Thai lenders have fully passed on a BOT rate cut since the start of the current easing cycle [1].

Bangkok Bank Pcl, Thailand's largest lender by assets, was the first to announce a 25-basis-point reduction in loan rates, matching the central bank's reduction. State-controlled Krung Thai Bank Pcl and Government Savings Bank followed suit with similar reductions on Thursday [1].

Payong Srivanich, president of Krung Thai Bank and head of the Thai Bankers Association, stated that the cuts aim to help all customer groups adapt to significant challenges arising from shifts in global production structures and supply chains, as well as intensifying competition in the near future [1].

The BOT has indicated that its monetary policy stance will remain accommodative, expecting a slowdown in economic growth into early 2026 due to the impact of a 19% U.S. tariff on Thai exports, subdued domestic consumption, and a decline in tourist arrivals [1].

The relief for borrowers also came after BOT Assistant Governor Sakkapop Panyanukul said the central bank expected lenders to pass on the benefit of rate cuts to customers. The meeting on Wednesday was the last to be presided over by Governor Sethaput Suthiwartnarueput, who will complete his five-year term on September 30 [1].

Incoming Governor Vitai Ratanakorn, known for his dovish stance on monetary policy, lauded Bangkok Bank's move to lower lending costs. In a Facebook post, he highlighted that cheaper funds will help support the business sector and the people. Ratanakorn is scheduled to chair his first rate meeting on October 8 [1].

Thai ministers have long urged banks to cut borrowing costs to help small businesses and households struggling to repay debt that surged during the pandemic. Finance Minister Pichai Chunhavajira noted that the latest rate cut will boost liquidity and support the Thai baht. Lower BOT rates will discourage banks from parking money with the central bank [1].

However, the lending rate cuts could further strain profit margins at major Thai banks, as net interest margins face additional pressure from weak loan growth. Bangkok Bank could be the most impacted, according to Sarah Jane Mahmud, a senior analyst at Bloomberg Intelligence [1].

The Thai economy is projected to grow in line with previous assessments, with the central bank expecting growth of 2.3% in 2025 and 1.7% in 2026. The economy is expected to slow in the second half of 2025 due to U.S. trade policies and a decline in short-haul tourist arrivals. Headline inflation is expected to remain subdued, with raw food prices falling due to favorable weather conditions and energy prices trending downward [2].

The change of guard at the BOT comes at a delicate time for Thailand, with ongoing domestic instability, political uncertainty, and potential disruptions to the FY2026 budget. Southeast Asia's second-largest economy also faces challenges from weak consumption and high household debt. Analysts expect further rate reductions at upcoming reviews in October and December [3].

References

[1] https://www.bloomberg.com/news/articles/2025-08-14/big-thai-banks-start-cutting-borrowing-costs-after-bot-rate-move
[2] https://www.marketscreener.com/news/bank-of-thailand-resumes-rate-cuts-to-boost-economy-update-ce7c51dbdb80fe2d
[3] https://www.reuters.com/world/asia-pacific/thailand-cuts-key-rate-near-three-year-low-growth-sputters-more-easing-expected-2025-08-13/