Banks urged to be more aggressive in providing loans<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia on Tuesday called on the banking sector to take
\nadvantage of the continued improvement in the country's macro-
\neconomic condition by aggressively increasing its lending
\nexposure to the private sector.<\/p>\n
A controllable inflation rate, stable exchange rate and the
\ndownward trend of the central bank's benchmark interest rate
\nshould become supporting factors for banks to improve their
\nintermediary role, Bank Indonesia said in a press statement.<\/p>\n
The statement was issued after a meeting between the central
\nbank and the government to discuss the country's overall banking
\ncondition. Coordinating Minister for the Economy Dorodjatun
\nKuntjoro-Jakti and Bank Indonesia senior deputy governor Anwar
\nNasution were among the participants at the meeting.<\/p>\n
Weathering the storm from both global and domestic issues, the
\nrupiah managed so far to maintain its resilience against the U.S.
\ndollar, to hover at a relatively stable range of around Rp 9,000
\nper dollar.<\/p>\n
As such, it has provided little pressure on inflation. In
\nMarch, year-on-year inflation rates stood at a mere 7.12 percent,
\non a month-on-month basis, it even went down by 0.23 percent, for
\na total January to March inflation rate of 0.77 percent.<\/p>\n
Such positive developments have pushed the central bank to
\nlower its interest rate. After hovering slightly below 13 percent
\nearly this year, the interest rate currently stands at around
\n11.3 percent. By contrast, early last year the rate stood at
\naround 17 percent.<\/p>\n
All these factors should give enough leeway for the banking
\nsector to be assertive in raising their credit portfolio,
\nespecially to the real sector, the statement said.<\/p>\n
The bank lending data, however, is a different story.<\/p>\n
Despite an improvement in the banking sector's overall
\ncondition in 2002 -- such as non-performing loans (NPLs) and
\ncapital adequacy ratio (CAR) -- its intermediary role has yet to
\nlive up to expectations.<\/p>\n
While the total loans extended by banks last year rose
\nsignificantly to around Rp 79.4 trillion from around Rp 60
\ntrillion the year before, only a small portion of it went to
\nproductive economic activities in the form of working capital and
\ninvestment.<\/p>\n
The remainder was used for regular operational expenditures.<\/p>\n
Bank Indonesia Governor Sjahril Sabirin has said that one of
\nthe main reasons behind the banks' reluctance to extend a huge
\namount of loans was the fact that the country's indebted private
\nsector still was perceived to be high risk.<\/p>\n
That discouraged banks from lending, as they would need to
\nprovide extra provisions to cover the loans, which would then put
\nthe banks' capital in danger.<\/p>\n
Bank Indonesia has targeted lending this year to go up by Rp
\n85 trillion, around half of which will go to small- and medium-
\nsized enterprises.<\/p>",
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