Bank Indonesia on Friday (12/1/07) unveiled a policy package aimed at boosting domestic commercial bank sector lending and economic growth, Dow Jones Newswires reported.
"The policy measures will have significant impact in our efforts to boost bank lending," Bank Indonesia Deputy Director Muliaman Hadad told reporters at a press briefing.
The lending stimulus package is designed to reduce loan provisioning by domestic banks to free up capital that can be steered into lending to the private sector.
The measures include raising the ceiling for loans that are subject to solely a "timely repayment" criteria - to determine whether the loan is performing well - to Rp5 billion from Rp500 million, he said.
Banks still have to consider two additional criteria; namely business outlook and financial performance, in classifying loans above Rp5 billion, Muliaman said.
Muliaman said Bank Indonesia will also allow banks to apply solely the "timely repayment" metric in classifying the loans funneled toward projects guaranteed by the government, including infrastructure.
Currently, 54% of all domestic bank sector lending is for individual loans of less than Rp5 billion, he said.
The central bank will also introduce money market securities, called Sertifikat Bank Indonesia, with terms longer than one and two months to discourage banks from parking their funds in the notes, and to loan them to companies instead.
"We are experiencing a liquidity overhang in the form of a (huge) SBI outstanding amount of Rp200 trillion," Hadad said.
The policy package also calls for deepening Indonesia's financial sector operations through the issuance of clearer regulations allowing banks to buy non-government bonds and other securities, he said.
Bank Indonesia will also limit the number of foreign expatriate executives that can staff foreign-owned banks, Hadad stated.
He said foreign expatriates will be limited to the top three tiers of management in any foreign-owned bank within three years of implementation of the pending regulation.