Banking sector improving, but lending remains weak<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Six years after the crisis, the country's banks are now in better
\nshape, although analysts lament the fact the industry is yet to
\nsignificantly resume its lending activities.<\/p>\n
\"The level of CAR, NPLs and other indicators have improved,
\nwhich could mean the banking sector remains on the track toward
\nrecovery,\" banking expert Elvyn G. Masassya said, referring to
\ncapital adequacy ratio and non-performing loans, two of the main
\nindicators used to gauge the health of banks.<\/p>\n
CAR is the ratio between capital and risk-weighted assets such
\nas loans. The higher the CAR the healthier a bank is.<\/p>\n
The NPL ratio measures a bank's non-performing loans against
\nits total loans. Loans on which interest payments are 90 days
\noverdue are categorized as non-performing.<\/p>\n
According to Bank Indonesia, the average CAR level of the
\nbanking industry stood at 24 percent as of the end of March,
\ncompared to 22 percent at the end of last year, and 20 percent
\nthe year before. The CAR level is way above the central bank's
\nminimum requirement of 8 percent.<\/p>\n
Banks have also gradually managed to cut down their NPLs from
\n12 percent two years ago to an average level of 8.15 percent in
\nMarch. Central bank officials said recently that most banks have
\nalready reduced their NPLs to below the maximum 5 percent limit.<\/p>\n
Moreover, there is also an improvement in banks net interest
\nmargin incomes, from less than 3 percent in 2001 to around 4
\npercent by March 2003.<\/p>\n
Analysts said that improving stability in the country's
\nmacroeconomic indicators and tighter prudential rulings
\nintroduced by Bank Indonesia have been instrumental in helping
\nbanks become healthier.<\/p>\n
The mid-1997 regional financial crisis had forced the
\ngovernment to shut dozens of banks and spend around Rp 650
\ntrillion (around US$79 billion) in public funds to bailout ailing
\nbanks, in what is seen as one of the costliest bank bailouts in
\nworld history.<\/p>\n
The government has started to sell a number of acquired banks
\n(mostly to foreign investors) to help recover the cost and
\naccelerate the recovery of the industry. Last year, it sold a
\nmajority ownership in Bank BCA, the country's largest bank. This
\nwas followed by the sale of Bank Niaga and Bank Danamon earlier
\nthis year.<\/p>\n
The sale of a 20 percent stake in the giant state-owned Bank
\nMandiri through an initial public offering process is still
\nunderway.<\/p>\n
The government is now planning to sell a majority stake in
\nBank Lippo and Bank Internasional Indonesia later this year. The
\nprivatization of state-owned Bank BRI is scheduled to take place
\nin November.<\/p>\n
Economist Dradjad Wibowo said that the entry of foreign
\ninvestors was expected to further improve the condition of the
\nlocal banks through their expertise and strong capital and
\nnetwork.<\/p>\n
\"Although it will take more time to be able to witness the
\nimpact of those acquisitions, I think it shows that they are
\ncapable of improving the banks' performance in the long term.<\/p>\n
\"That was exactly why the government is pushing with its
\nbanking sale program, which aims to speed up the recovery in the
\nsector, thus restoring public confidence,\" he said.<\/p>\n
But despite all the progress, banks are still being criticized
\nfor impotency in reviving loans to the corporate sector.<\/p>\n
The central bank has been aggressively cutting down its
\nbenchmark interest rate during the past year, which now stands at
\n9.23 percent compared to more than 13 percent earlier in the
\nyear, but banks still maintain lending rates at a high rate of
\naround 18 percent. Borrowers said that the ideal rate should be
\n13 percent to 14 percent.<\/p>\n
\"If the banking sector remains slow in cutting its lending
\nrate do not expect rising demand for loans from the private
\nsector, let alone its quick revival,\" a local businessman said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/banking-sector-improving-but-lending-remains-weak-1447893297",
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