to cover upcoming installments. this problem is compounded by very tough debt collection procedures for borrowers who are unable to pay. finally their purchased merchandises would be repossessed and their high debt levels sometimes lead to job losses. historically, the bank of thailand had no authority to regulate these non - bank credit - card companies, due to their status as non - deposit - taking institutions. however, as we continued to witness the potential danger of these companies ’ behavior, the bank of thailand decided to step in. after requesting and receiving the government endorsement on this course of action, the bank of thailand is now entrusted with the oversight role of all credit card providers, including non - deposit - taking companies. since november 2002, the bank of thailand has issued circulars to regulate the provision of credit card services. a minimum income requirement for cardholders has been set at 15, 000 baht, and a cap on the maximum interest rate charged set at 18 % per annum. this initial action has somewhat slowed the expansion of credit card businesses ; however, further measures were needed. in april 2004, the bank of thailand revised regulations to raise the minimum amount of monthly payments from no less than 5 % to 10 % of outstanding debt, and shorten the term for debt payment from 20 to 10 months. the increase in the minimum monthly payment to 10 % aims to prevent cardholders from spending more than their ability to repay, as well as help pace their purchasing of items in order to prevent an excessive debt repayment burden in the future. after the second regulatory revision, the annual growth rate of credit outstanding for installments of credit cards issued by commercial banks declined from 40 % to 17 %, a rate which may be less likely to create problems. with more stringent supervision in the credit card business by the bank of thailand, a new phenomenon has arisen : growth in the personal loan business, particularly since 2003. this has proliferated in various types of institutions, including commercial banks - especially foreign - owned commercial banks, and existing credit card companies. in addition, new foreign - owned non - bank companies, registered as limited companies and not as financial institutions, can undertake the business of lending to individuals, without requiring approval from the bank of thailand, as they are not deposit - taking institutions. these companies have opened branches in many major provinces throughout the country. in many cases, these businesses rent a shop - house as an office to provide personal loans to low - income borrowers, for

yandraduth googoolye : supervision and regulation of state - owned banks address by mr yandraduth googoolye, first deputy governor of the bank of mauritius, at the financial stability institute, world bank and international monetary fund seminar on “ supervision and regulation of state - owned banks ”, hosted by the reserve bank of india, mumbai, 5 november 2008. * * * distinguished guests, ladies and gentlemen, i am very pleased to be in mumbai today to share a few thoughts on supervision and regulation of government - owned banks. i must at the outset compliment the financial stability institute, world bank and international monetary fund for having chosen this issue as the theme for this seminar. no subject could be more topical in the current context given that we are seeing in the west a reverse process of private banks getting wholly or seminationalized. therefore, the lessons of this seminar, which is targeted at the emerging economies, could be useful for the developed world as well, in a more meaningful way than perhaps they might have been a few weeks ago. before getting to the theme of regulation and supervision of government - owned banks, let us see the different ways in which government can have stakes in banks. firstly, government ownership can arise at the initial shareholding stage, i. e. an entity in which government has majority shareholding applies for a banking licence. secondly, government may set up a bank or nationalize existing bank ( s ) through an act of parliament to further its social and developmental objectives, and thirdly government could acquire shares in an existing bank to bailing out a failing bank, something quite fashionable these days! indeed there is an extensive literature and a lot of debate on the role of government ownership in banking. it would perhaps be useful to briefly touch upon some of the theories that have been put forward on government ownership in banking. the views that have been more frequently associated with state ownership of banks are the social view, the political view and the agency view. the social view suggests that government - owned banks contribute to economic development and improve general welfare ( atkinson and stiglitz ( 1980 ) ). the political view highlights the role of politicians in pursuing their personal goals, for example maximizing employment of their electorate or financing favoured enterprises ( shleifer ( 1998 ) ). the agency view relates to the agency costs in government bureaucracy that may result in managerial inefficiency ( banerjee ( 1997 ), hart, shleifer and vishny (