Recognizing the importance of banking to the nation’s trade and economy, H.R.H. Prince Mahisara, in his capacity as Finance Minister, endeavoured to found a central bank to represent the government’s financial activities and to produce banknotes. When he met opposition from foreign consultants, the Prince changed his focus to improving and regularizing Thai money units.
In 1898, he reduced the then nine types of Thai coins— the chung, tamlueng, baht, salueng, fueng, seeg, siew, utt and solot—to just two units: baht and satang. The new decimal system (100 satang equalled 1 baht ) facilitated calculation and accounting. English authorities were contracted to produce banknotes and in 1902, the Thai currency system was converted to coinage and banknotes.
Once the country’s monetary system had been regularized, the system of pod duang money was officially demonetized on 28 October 1904.
Having encountered opposition in establishing a central bank, H.R.H. Prince Mahisara focused instead on setting up a private commercial bank. He recognized that while the country was obliged to trade with other countries, Thai and Chinese merchants were hamstrung by language and confusion about banking procedures in seeking assistance from foreign commercial banks.
The Prince was determined to rectify this situation. He felt that an trial experimental bank was an appropriate means for Thais to obtain knowledge about bank management, which could be applied to its future expansion. More importantly, the Prince perceived that the experimental bank would effectively train Thai staff in commercial bank procedures.
After procuring an investment of 30,000 baht, he applied for a licence to establish the “Book Club” and ordered stationery, forms, and office equipment. He also secured from the Privy Purse a lease on a building in the Ban Moh district. Once the license had been granted, he recruited staff and management.