Deflation not a worry in Thailand: Central bank chief

BANGKOK, July 14 (TNA) - Thailand's central bank sees no sign of a liquidity problems in the country's commercial banks and in relation todeflation, Bank of Thailand (BoT) governor Tarisa Watanagase said Monday.

Commercial banks have invested as much as Bt500 billion in government bonds and in short-term investments, and their lending ratio against deposits stands at about 80 per cent, said Mrs. Tarisa, adding thatbanks still have more than adequate liquidity.

"Liquidity in the commercial banking system is still normal," Mrs.

Tarisa said. "The BoT is not worried about deflation problem becausethere is still enough cash in the market.

"Because more people have changed to using E-cards, some Bt43 billionin cash has disappeared but this is not worrisome, she said.

Touching on two US financial firms which have encountered cashflow problems due to the sub-prime lending crisis, Mrs. Tarisa said the problem would not have a direct impact upon Thailand. However, it is worth monitoring how the US Federal Reserve would assist on raising capital for financialinstitutions.

The US sub-prime problem has, however, caused a volatility in the US in-out capital inflows, forcing global equity markets to retreat, including the Thai bourse, but no direct impact on Thai financial institutions has been seen sofar, she said.

Meanwhile, Chittima Duriyaprapan, director of the BoT's Banknote Management Office, said the current decline in banknotes in the market wasattributed to less spending by people in the absence of festivities.

According to Mrs. Chittima, circulation of banknotes is expected to increase in the fourth quarter this year as people prepare to celebrateChristmas and the New Year.

Mrs. Chittima said the central bank is studying whether the fall ofbanknotes in circulation is related to the sluggish economy in Thailand.

(TNA)