From August 11, 2021 onwards, Thai Baht deposits that are protected under the Deposit Protection Agency (DPA) Act will have a lower coverage limit of THB1 million per depositor per financial institution. KResearch perceives that the objective of this imminent decrease in deposit protection is to foster financial discipline among both financial institutions and depositors. The reduced deposit coverage limit aims to lessen the risk of burdens to be shouldered by the government and taxpayers, as witnessed by the Financial Institutions Development Fund (FIDF) during the 1997 financial Crisis.
Moreover, the reduction of deposit protection limit has been scheduled for some time, while the strong financial position of Thai financial institutions at present makes it unnecessary to postpone the cut. This action is in line with the deposit insurance practices of the International Association of Deposit Insurers (IADI), which observes that most deposit insurance institutions have opted to maintain the same level of protection, as opposed to the increase seen during the 2008 financial crisis. Meanwhile, those with savings have been given plenty of opportunity to make overseas investments over the past several years. This shows that, unlike in the 1997 crisis, the Thai financial system is not currently hampered by liquidity problems.
Even though the deposit protection will be limited to THB1 million per depositor per financial institution, the number of accounts that will remain within DPA's full protection represents more than 98.0 percent of all account holders at commercial banks, covering approximately 82.1 million accounts. Such a figure is consistent with the principle of deposit protection which aims to provide a majority of the population basic welfare. Looking at overall deposits in the Thai banking system, total coverage amount will be around THB3.2 trillion, or about one-fifth of all deposit amounts in the Thai banking system. Meanwhile, the remaining four-fifths of all deposit amounts are placed in deposit accounts for high-net-worth individuals and deposit accounts for institutions or businesses with account balance exceeding THB1 million. However, these depositors have sufficient financial literacy to safeguard their wealth and accept more risks from savings/investments. At the same time, they tend to conduct transactions via their deposit account for business purposes rather than for the purpose of savings to receive principal and interest protection.