Banks asked to form debt restructuring unit<\/p>\n
JAKARTA (JP): Indonesian banks are obliged to set up special
\nworking units to restructure their non-performing loans before
\nFeb. 12, 1998, according to Bank Indonesia.<\/p>\n
Detailing its November ruling on bank credit restructuring
\nguidelines, the central bank said the working units should be
\nstaffed by people unconnected with decisions to issue the loans.<\/p>\n
Muchlis Rasyid, deputy chairman of the Jakarta Initiative Task
\nForce on debt restructuring, who is in charge of restructuring
\nmore than Rp 691 trillion in private sector debt owed to domestic
\nbanks, explained the loan guidelines to bankers here on
\nWednesday.<\/p>\n
The guidelines stipulate that banks are allowed to provide
\ndebtors with seven restructuring incentives, including lower
\ninterest rates, a reduction of unpaid interest, debt relief,
\npayment extension, new financing facilities, debt-for-asset
\nswaps, and debt-for-equity swaps.<\/p>\n
Banks also have limited scope to provide additional
\nrestructuring incentives and are allowed to demand greater
\nprotection for their loans.<\/p>\n
However, Bank Indonesia has stated that only viable debtors
\nare eligible for the incentives because the main objective of the
\nrestructuring process is to improve the business performance of
\ndebtors and secure repayment of their debts.<\/p>\n
Muchlis said that so far 57 companies with a combined debt of
\nRp 15 trillion owed to domestic banks had sought to make use of
\nthe restructuring incentives.<\/p>\n
\"Two companies have agreed restructuring deals,\" the former
\nmanaging director of Bank Indonesia told reporters after the
\ngathering.<\/p>\n
Jakarta Initiative Task Force chairman Jusuf Anwar said last
\nmonth that the new ruling had been made to help banks enter into
\nrestructuring deals.<\/p>\n
\"This should help to appease bankers' fears that they will be
\naccused of KKN if they offer to forgive or restructure debts owed
\nto them,\" he said.<\/p>\n
KKN is an Indonesian acronym for corruption, collusion, and
\nnepotism.<\/p>\n
Restructuring the country's banking sector is a key to the
\nrecovery of the crisis-hit economy. (rei)<\/p>",
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