Bad credits increase<\/p>\n
The quality of credit portfolios at all commercial banks, as
\nreported by central bank governor Soedradjad Djiwandono to the
\nHouse of Representatives on Tuesday, seemed to improve because
\nthe proportion of non-performing credits declined to 12.64
\npercent of total loans outstanding as of January from 13.06
\npercent last September.<\/p>\n
That is a big number indeed. In absolute terms, the non-
\nperforming assets -- problem, doubtful and bad credits --
\namounted to Rp 24 trillion (US$10 billion) or 30 percent of the
\ntotal volume of the state budget for the coming fiscal year.
\nThese figures indicate that the banking industry is still
\nsuffering a great deal from the \"go-go lending\" practices from
\n1989 to 1991.<\/p>\n
More worrisome is the increase in the proportion of bad
\ncredits to 3.97 percent in January from 3.88 percent last
\nSeptember. This equals about Rp 7.5 trillion. The amount of bad
\ncredits may continue to increase if banks do not improve the
\nquality of the remaining $6.6 billion in problem and doubtful
\nloans.<\/p>\n
The central bank's report confirmed the public's concern about
\nstate banks. The bulk of the bad credits, Rp 6.1 trillion, belong
\nto the seven state banks. The proportion of non-performing
\ncredits at state banks, 20.2 percent, was also much higher than
\nthe industry average of 12.64 percent.<\/p>\n
Nonetheless, encouraging messages can also be gleaned from
\nSoedradjad's disclosure. The central bank seems to have tightened
\nits monitoring and assessment of banks' lending portfolios. As
\nBank Indonesia's Director Hendrobudiyanto explained at the
\nhearing, the amount of bad credits surged by Rp 900 billion last
\nDecember alone. The increase was not caused by the worsening of
\nproblem and doubtful loans, but due to a correction of previous
\ndata based on fresh findings from on-site examinations.<\/p>\n
This correction, we think, should be welcomed because it
\nresulted from a better supervision mechanism and is only the
\nimmediate impact of the improvement. Previously, Bank Indonesia's
\nassessment of balance sheets and financial reports as well as on-
\nsite examinations were conducted by different teams. Now the same
\nteam is responsible for both audits at each bank.<\/p>\n
Another encouraging message is the central bank's openness
\nabout bad credits. Such frankness and honesty about the figures
\nis quite conducive in preventing wild rumors circulating about
\nthe banking industry. Given the systemic risks encountered by
\nbanks, timely, accurate, comprehensive and objective data is
\ncrucial to prevent unnecessary jitters among the public. How can
\nan assessment of the health of the banking industry be carried
\nout if the statistics are flawed, outdated or fiddled with?<\/p>\n
The central bank's statistics quite obviously show that the
\nbanking industry, notably state banks, still have a long a way to
\ngo to consolidate internally. It is therefore imperative that the
\ncentral bank continue to improve its supervision of banks to
\nforce all banks to fulfill all prudent regulations.<\/p>\n
The fact that the bulk of bad credits belong to state banks is
\na strong reminder to the central bank to question why most bad
\nbankers work at state banks.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bad-credits-increase-1447893297",
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"sponsor": "Okusi Associates",
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