On 5 January 2021, the Bank of Thailand (BOT) introduced the Non-Resident Qualified Company Scheme (the Scheme) which allows greater flexibility for non-resident companies to conduct foreign exchange transactions against Thai baht with domestic financial institutions.
Non-resident companies that trade and have direct investment in Thailand are eligible for the Scheme, provided that they are not engaging in financial and gold businesses. Additionally, portfolio investments are excluded from utilizing the Scheme.
Offshore treasury centers may also be eligible for the Scheme where they are managing foreign exchange risk for non-resident companies which satisfy the above-mentioned criteria.
The Scheme provides the following benefits for eligible non-financial companies:
1. Greater freedom in managing currency risks related to the Thai baht
Non-Resident Qualified Companies are not required to provide documentary proof for each underlying transaction.
The range of eligible underlying transactions has been widened to cover anticipatory hedging and balance sheet hedging.
2. Greater flexibility in managing Thai baht liquidity
Non-Resident Qualified Companies will not be subject to the end-of-day outstanding limit of 200 million Thai baht imposed on Non-Resident Baht Accounts (NRBAs).
The Scheme is part of the Bank of Thailand’s push to develop Thailand’s foreign exchange ecosystem through structural reform of the domestic foreign exchange market. The main objective of the Scheme is to increase the depth and breadth of the domestic foreign exchange market, in addition to boosting market transparency and surveillance.
This relaxation by Thailand’s central bank also serves to curb the strength of the Thai baht, thus maintaining long-term currency stability. To this end, it has been observed that the currency has gained nearly 11 percent against the U.S. dollar since April 2020.