BKPM urges BI to help boost lending<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
Amid an excess of liquidity within the banking sector, the
\nInvestment Coordinating Board (BKPM) has urged the central bank
\nto find a way to encourage banks here to increase lending and so
\nhelp promote domestic investment.<\/p>\n
BKPM Chairman Theo F. Toemion said Bank Indonesia had done
\nlittle to help revive domestic investment at a time when foreign
\ninvestment was still hard to come by.<\/p>\n
\"We are not talking about luring foreign investment here as
\nthere is a lot of local potential that has not been fully availed
\nof, such as excessive liquidity in the banking sector,\" said Theo
\nafter meeting Vice President Jusuf Kalla on Wednesday.<\/p>\n
Theo said the meeting was aimed at exploring ways of helping
\nconvert this excessive liquidity in local banks and pension funds
\ninto investment in the real sector, which had yet to recover from
\nthe crisis due in part to a lack of working capital.<\/p>\n
Reviving the real sector by boosting domestic investment is
\npart of the government's priorities for generating economic
\ngrowth of a level sufficient to deal with the problem of chronic
\nunemployment.<\/p>\n
At present, it is reported that the banking sector has
\nexcess liquidity of about Rp 200 trillion (US$21.5 billion),
\nwith most of the money being invested in the central bank's
\npromissory notes, and securities and foreign exchange.<\/p>\n
The excess is attributable to strict prudential management
\nbeing applied by the banking sector to reduce risk and the
\nrelatively low demand for loans from the corporate sector --
\nexacerbated by double-digit interest rates for loans on average
\nat the present time, which are considered high when compared to
\nBank Indonesia's benchmark interest rate of around 7 percent.<\/p>\n
\"At present, our banking sector is in a comfort zone. It is
\nsimply wasteful if they refuse to significantly boost their
\nlending, by lowering their interest rates, because of trauma in
\nthe past,\" said Theo.<\/p>\n
In terms of financial health, the country's banking sector has
\nsuccessfully managed to recover from the impact of the late 1997
\nfinancial crisis, with the situation regarding capital adequacy
\nratio (CAR), non-performing loans (NPLs) and profit all rapidly
\nimproving.<\/p>\n
In terms of lending exposure, however, the current loan-to-
\ndeposit ratio (LDR) of around 60 percent is still below the pre-
\ncrisis level of above 80 percent.<\/p>\n
According to Theo, Vice President Kalla had expressed the hope
\nthat the banking sector would lower its interest rates to below
\n10 percent from the current rate of about 13 percent on average.<\/p>\n
However, the final say on the issue would be entirely up to
\nthe central bank, which has been granted independence from the
\ngovernment in determining banking sector policy.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bkpm-urges-bi-to-help-boost-lending-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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