Banks financial condition improving, but lending remains slow: BI<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Behind the apparent progress made by the banking sector in
\nimproving its financial health, the slow growth in lending to the
\nprivate sector remains a major concern, according to the central
\nbank's assessment.<\/p>\n
Speaking on Tuesday before the legislators at House Commission
\nIX on financial affairs, Bank Indonesia Governor Burhanuddin
\nAbdullah said such a condition had resulted in huge overliquidity
\nin the banking sector.<\/p>\n
\"Today, the sector has some Rp 200 trillion (US$23.67 billion)
\nin excess liquidity; some Rp 140 trillion of which is invested in
\nSBI (Bank Indonesia promissory notes). Banks then enjoy Rp 12
\ntrillion to Rp 16 trillion in interest payments.<\/p>\n
\"This has created a sort of circle for some time now, which is
\nunhealthy. Some part of the money is supposed to go to
\ncorporations to help fuel the economic wheels,\" he explained.<\/p>\n
In its latest report, the central bank said that new loans in
\nthe first eight months of this year only grew by 1.83 percent
\ncompared to the same period last year. The new loans stood at Rp
\n50 trillion, which accounted for some 57.3 percent of the planned
\nfull-year lending volume, from Rp 49.1 trillion in the same
\nperiod last year.<\/p>\n
The increase, Burhanuddin said, was far than enough for the
\nindustry to play significant role in speeding up the economic
\ngrowth.<\/p>\n
\"The bank loans need to grow between 20 percent to 22 percent
\nper annum to be able to push economic growth to around 5
\npercent,\" he said.<\/p>\n
Indonesia's economy, which has been growing by 3 percent to 4
\npercent in the past couple of years, could use a boost from
\nrobust productive activities to help it achieve higher economic
\ngrowth. But the slow growth in lending provides little ammunition
\nfor the sector to do so.<\/p>\n
Analysts and bankers have said that the country's corporate
\nsector is still deemed risky, as its debt restructuring process
\nremains slow. Most banks are consequently focussing their loans
\nmore on consumers -- which includes credit for individuals and
\nsmall and medium-sized enterprises (SMEs) -- rather than for the
\ncorporate sector.<\/p>\n
One important development that should also be taken into
\naccount is the fact that many corporations are turning to
\nalternative financing sources other than banks. Corporate bonds
\nissue has been among the favorites. More than Rp 20 trillion
\nworth of corporate bonds had been issued as of September.<\/p>\n
Elsewhere, Burhanuddin also said the slight improvement in
\nlending was a stark contrast with progress made by banks in
\nimproving their financial health.<\/p>\n
Bank's third-party funds in the banking sector had grown by
\n0.7 percent as of August, while the average capital adequacy
\nratio (CAR) was at 26 percent, far above the central bank's
\nminimum requirement of 8 percent. The return on assets (ROA) of
\nbanks also stood at a relatively healthy 2.4 percent.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/banks-financial-condition-improving-but-lending-remains-slow-bi-1447893297",
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"sponsor": "Okusi Associates",
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