Bank Mandiri seeks House approval for debt write-off proposal<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The nation's largest lender, Bank Mandiri, will seek approval
\nfrom the House of Representatives to write-off its troubled
\ncredits totaling Rp 21 trillion (US$230 million) in a move to
\nease the huge burden on its financial balance.<\/p>\n
Nimrod Sitorus, the bank's director and corporate secretary,
\nsaid on Tuesday that such a move would allow the bank to erase
\nthe troubled loans from its balance sheet, meaning that it would
\nno longer have to allocate huge provisions to cover for them.<\/p>\n
\"However, it has to be understood that a write-off does not
\nmean the loans become uncollectable. Mandiri will retain the
\nright to collect the money, along with the collateral, but at a
\nreduced amount.<\/p>\n
\"So basically, it's a hair-cut for the debtors,\" said Nimrod
\nduring a breaking of the fast gathering.<\/p>\n
The government is eligible in certain circumstances to grant a
\ndebt write-off through a presidential decree, but only for debts
\nworth below Rp 100 billion.<\/p>\n
\"More than that, they should be approved by the House. That's
\nwhat we intend to do,\" Nimrod said, adding that the bank expects
\nto meet the legislators by the end of the year.<\/p>\n
Some of the troubled loans are ones that were the subject of
\nlengthy legal disputes.<\/p>\n
But Nimrod said that none of the debts had come from loan
\nassets the bank bought from the now-defunct Indonesian Bank
\nRestructuring Agency (IBRA).<\/p>\n
Bank Mandiri was among the most active lenders that managed to
\npurchase non-performing loans (NPLs) taken over by IBRA from the
\nbanking sector during the crisis.<\/p>\n
Of the total bad loans, Nimrod said, Rp 4.6 trillion were
\nthose of an individual size of below Rp 5 million and, thus, are
\ncategorized as loans owed by small and medium enterprises (SMEs).<\/p>\n
As for the recovery-rate target, the bank is hopeful of
\nrecovering around 30 percent to 50 percent of the outstanding
\ndebts.<\/p>\n
\"Such a scheme is actually a win-win solution, both for the
\nbanks and debtors. Although at discounted prices, banks can cash
\nin the debts that have long been idle, and perhaps start making
\nmoney out of them.<\/p>\n
\"It would also be helpful for debtors, as surely they will not
\nwant to remain on the banks' blacklists forever,\" he said, adding
\nthat the target should be realistic as much of the collateral was
\nof a fairly high value, such as land and buildings.<\/p>\n
Meanwhile, it was also revealed that, as of June 2004, the
\nbank had unloaded some Rp 61 trillion of Rp 173 trillion worth of
\nrecapitalization bonds it received from the government during the
\nfinancial crisis.<\/p>\n
As of the first half of the year, the bank's recapitalization
\nbonds stood at Rp 102.3 trillion.<\/p>\n
\"We sold them to the bond market and replaced them with more
\nproductive assets, such as loans. We are using the proceeds to
\ncover the high interest we have to pay to our depositors,\"
\nKartika Wirjoatmojo, vice president of the bank's strategy and
\nperformance division, said.<\/p>",
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