BI defends property loan ban<\/p>\n
JAKARTA (JP): Central bank Governor Soedradjad Djiwandono
\nyesterday defended a ban on new loans for land acquisition and
\ndevelopment, saying that moral suasion had not curbed a rapid
\nincrease in property loans.<\/p>\n
Speaking to House of Representatives Commission VII for
\nfinance and trade, Soedradjad said Bank Indonesia (BI), the
\ncentral bank, had tried a moral suasion policy with banks for
\nthree years to stop them from giving property loans.<\/p>\n
"But at that time people didn't take us seriously," he said.<\/p>\n
Last year, BI required banks to submit annual planning
\nreports, which included the amount banks were planning to
\ndisburse in loans that year.<\/p>\n
"Some people may think this has been ineffective, but the fact
\nis, things could be worse had we not made this stipulation," he
\nsaid.<\/p>\n
He said many banks were still disbursing loans at a rate which
\nexceeded the allowable 20 percent growth a year.<\/p>\n
"Our decision to curb property loans is not an unexpected
\nmove. Moral suasion just hasn't worked," he said.<\/p>\n
BI on Monday issued a decree banning new loans for land
\nacquisition and development by property companies. The ruling,
\nwhich does not apply to cheap housing projects, is to control the
\nrapid rise in lending to the property sector.<\/p>\n
Soedradjad said that at present more than 90 percent of loans
\nto the property sector were well-performing.<\/p>\n
"Thus, compared to total loans, property loans performed
\nbetter," he said.<\/p>\n
He said a rapid increase in property loans could endanger
\nbanking and monetary stability because the sector was vulnerable
\nto economic change.<\/p>\n
He said property sector financing was long-term in nature, but
\nfunds were absorbed in the short term.<\/p>\n
"Liquidity and market risks faced by the banks providing these
\nloans are relatively high," he said.<\/p>\n
He said property loans as a percentage of total loans rose to
\n19.61 percent in April 1997, from 12.2 percent in December 1992,
\nwith commercial private banks posting the highest growth.<\/p>\n
Official figures show that bad debts in the property sector
\nrose 39.2 percent to Rp 4.66 trillion (US$1.9 billion) in the
\nfirst quarter of 1997, over those of last December.<\/p>\n
The property sector's cumulative debts as a proportion of
\ntotal banking credit increased from 18.8 percent at the end of
\nlast year to 19.6 percent in the first quarter of 1997.<\/p>\n
Bad debts<\/p>\n
Cumulative bad debt in the construction sector rose 12.3
\npercent to Rp 2.35 trillion, while bad debt in the housing sector
\nrose 27.8 percent to Rp 634 billion during that period.<\/p>\n
Soedradjad said total bank bad debts as of April were Rp 10.23
\ntrillion, or 2.93 percent of total outstanding loans which stood
\nat Rp 349.77 trillion.<\/p>\n
This was higher than the bad debt level recorded in December
\nlast year, which was Rp 9.5 trillion or 2.87 percent of the total
\nRp 331.29 trillion.<\/p>\n
"As a percentage of total credits outstanding (2.93 percent),
\nbad debts were fairly small," he said.<\/p>\n
Soedradjad said that of the 2,068 big bad debtors to state
\nbanks whose cases were being handled by a central bank special
\ncredit team, 277 had repaid their debts, 51 were acquired by
\ntheir creditors, 351 were rescued through loan rescheduling,
\nrestructuring and reconditioning, 45 were taken to the State
\nReceivership and 85 were written off.<\/p>\n
On BI's monetary policies, Soedradjad said the central bank
\nwould continue to act prudently this (1997\/1998) fiscal year,
\ndespite the fact that inflation rates during the previous fiscal
\nyear were kept down to 5.17 percent -- the lowest since
\n1985\/1986.<\/p>\n
"This fiscal year, the monetary authorities will maintain
\nmonetary aggregates at a level that does not have an upward push
\non prices and the current account," he said.<\/p>\n
He said BI would continue to use open-market operations and
\nmoral persuasion as the main instruments to reach the desired
\nlevel of money supply in broad terms and bank lendings. (pwn)<\/p>\n
Bad debts -- Page 12<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/bi-defends-property-loan-ban-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }