The banking sector will continue lending to businesses this year, although not as aggressively as in 2008, two senior bankers say.
“We don’t want to be too conservative about providing loans,” said Agus Martowardojo, chairman of the Indonesian Bankers Institute, or IBI.
“We are also talking to the central bank about easing the guidelines for assessing the creditworthiness of companies.”
Outstanding loans at commercial banks rose 38.5 percent year-on-year in October to Rp 1,297 trillion ($119.3 billion).
Bank Indonesia, the country’s central bank, said in November that loan growth in the domestic banking sector would increase by between 19 percent and 21 percent in 2009, after rising by an estimated 30 percent last year.
However, Agus said that loan growth would only be between 15 percent and 20 percent in 2009.
He said that banks would have to continue exercising prudence in lending to prevent their nonperforming loan, or NPL, ratios from rising significantly.
NPL ratios at commercial banks rose to 3.34 percent in October from 3.32 percent in September, but remained safely below the central bank’s maximum threshold of 5 percent.
Banks have taken anticipatory steps to prevent their NPL ratios from rising by improving risk management, Agus said.
He also said that the IBI was urging the central bank to encourage commercial bank lending to strong corporations with solid credit ratings, even if they operated in sectors with poor short-term outlooks.
Agus said the banks had to consider three main factors before extending loans to companies: their ability to repay their debts, their financial condition and the prospects for their sectors.
However, due to the current economic climate, Agus said, less weight than usual should be given to the prospects of a company’s particular sector when assessing its creditworthiness.