Bad loans at private banks on decline<\/p>\n
JAKARTA (JP): Bad credits at Indonesia's private banks
\ndeclined by 6 percent within five months to Rp 1.6 trillion
\n(US$695 million) as of last November, said the chairman of the
\nFederation of National Private Banks (Perbanas), Trenggono
\nPurwosuprodjo.<\/p>\n
Trenggono told a hearing with the House of Representatives
\ncommission for finance, trade and cooperatives yesterday that the
\namount of bad loans at private banks decreased from Rp 1.7
\ntrillion, or 0.70 percent of their total credits outstanding in
\nJune, to Rp 1.6 trillion in November.<\/p>\n
He added that the bad loans as of November represented 0.60
\npercent of their total outstanding credits.<\/p>\n
He acknowledged difficulties in a quick elimination of the bad
\nloans. \"But there is still a fair chance for the private banks to
\ndecrease them to as low as 0.2 percent,\" he said.<\/p>\n
In comparison, according to the latest Perbanas data, bad
\ncredits at the seven state-owned banks increased from Rp 7.3
\ntrillion as of June last year to Rp 7.9 trillion five months
\nlater. But in terms of a percentage of their total credits, the
\nbad credits decreased slightly from 3.05 percent to 3.04 percent.<\/p>\n
Perbanas groups 164 private domestic banks in the country.<\/p>\n
He cited the violation of legal lending limits as one of the
\nmain reasons for the bad loans.<\/p>\n
The rule on legal lending limits stipulates that lending by a
\ncommercial bank to a single customer or a group of companies
\ncannot exceed 20 percent of its capital, while lending to a
\nborrower affiliated with the bank cannot amount to more than 10
\npercent of its capital.<\/p>\n
On the question of interest rates, Trenggono noted that
\ncurrent interest rate levels should be maintained to prevent the
\noutflow of funds to foreign countries.<\/p>\n
Currently, deposit rates in private banks are averaging 17
\npercent per annum, while lending rates are at an average of 21
\npercent.<\/p>\n
\"The present high interest rates are only temporary. They are
\nnecessary to cool down the overheating economy,\" he said, adding
\nthat the rates should be kept until the overheating problem is
\nresolved. (13)<\/p>",
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