Thailand is a developing country. One of the important factors in improving the country’s economy is funding. The Bank of Thailand as a central bank of a developing country should assume an important role by managing the financial system of the country properly. The extension of financial support to major economic sectors is one of the measures of the Bank of Thailand in allocating limited fund in the most effective way towards the development of the economy. Rediscounting of promissory notes is one way in which the Bank of Thailand can assist these major sectors. The main objective of this facility is to reduce the overhead cost of agriculturists, manufacturers and exporters by lending through commercial banks against promissory notes issued by those businesses as collaterals. This also helps to improve the liquidity position of commercial banks. The Bank of Thailand rediscounting facilities were started on January 2, 1956. By pledging promissory notes issued, rice exporters can reduce cost and hence compete with exporters from other countries in the international market. Since then the extent of the rediscounted promissory notes with the Bank of Thailand has expanded to include industrialist and agriculturists because the Bank of Thailand considers such assistance beneficial to the development of the economy. Moreover, in support of the short-term economic policy or monetary policy, the Bank of Thailand has from time to time extended such assistance to businesses or financial institutions faced with financial difficulties. As the rediscounting of promissory notes with the Bank of Thailand not only supports entrepreneurs and financial institutions but also contributes towards the development of the country, the study of this matter and the recommendations given should be beneficial to the country as a whole. In this study the writer has conducted the research not only from rules, regulations and documentations in both Thai and English but also from the observation and interviews with the Bank of Thailand officers who are responsible for the functioning of the rediscounting facilities. In addition, interviews were also conducted with officers and administrators of financial institutions which rediscount promissory notes with the Bank of Thailand and, by means of questionnaires; information was also gathered from entrepreneurs requesting assistance from such facilities. From this study, we find that lending through rediscounted promissory notes from export bills is the most popular form of assistance received. For example, in 1982 promissory notes rediscounted with the Bank of Thailand from exporters amounted to 61,071.8 million baht compared with promissory notes from industrialist, agriculturist and others of only 5,795.0 million baht, 1,679.7 million baht and 4,010.5 million baht respectively. This may be explained by the fact the financial institutions prefer to rediscount promissory notes from export bills, which provide them not only with the rate of return of 2% per annum but profit from related foreign exchange, and other services. From this study, we find that the problems of rediscounting promissory notes with the Bank of Thailand are complicated rules and procedures, inefficient advertising, and lack of co-ordination among all concerned. Should everyone help to solve these problems, the country would benefit from improved efficiency of the system.
