'SBI rate ready to fall below 10%'<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia Governor Burhanuddin Abdullah said on Monday that
\nthe interest rate on the central bank one-month SBI promissory
\nnotes was ready to fall to below 10 percent this week or next
\nweek.<\/p>\n
He said that the lower benchmark rate would allow banks to
\nfurther cut down lending rates to make borrowing more affordable
\nfor the corporate sector.<\/p>\n
\"The market still wants the SBI rate to go down. I think it
\ncan (fall) to below 10 percent this week or next week,\"
\nBurhanuddin said during a workshop on banking.<\/p>\n
The one-month SBI rate declined to 10.07 percent during last
\nWednesday's weekly auction from 10.27 percent previously.<\/p>\n
The central bank has been trying to guide its interest rate
\nlower amid a weak inflation environment and a stronger exchange
\nrate of the rupiah against the U.S. dollar. Bank Indonesia sets
\nthe benchmark rate based on bids at the weekly auction.<\/p>\n
The SBI rate was hovering at more than 13 percent in January
\nof this year.<\/p>\n
The fall in the SBI rate would not only help increase bank
\nlending to the corporate sector, but should also ease the
\ngovernment's burden in servicing its huge domestic debts
\nresulting from the costly bailout of banks during the late 1990s
\nfinancial crisis.<\/p>\n
The higher loan volume to the corporate sector, and the
\nlighter government burden in repaying debts should help push
\neconomic growth, which is projected at 4 percent this year. Such
\nmeager growth rate, however, is deemed insufficient to decrease
\nthe massive unemployment in the country.<\/p>\n
Analysts have been critical of the aggressive cut in the SBI
\nrate, as loan volume to the corporate sector remains small while
\ninterest rates on loans remains relatively high.<\/p>\n
Burhanuddin said that some banks have already cut their
\nlending rates to around 17 percent from more than 20 percent, but
\nthe problem was that many companies particularly large ones were
\nstill reluctant to borrow more money, as they were still either
\nin a consolidation process or restructuring their old debts.<\/p>\n
\"There are already many banks which have lowered their lending
\nrates, but the problem is that businesses can't absorb (the
\nloans),\" he said.<\/p>\n
Burhanuddin said that the central bank was considering steps
\nto ease rulings on lending to help revive the intermediary role
\nof the banking industry.<\/p>\n
He said that Bank Indonesia would review the ruling which
\nlimits banks in purchasing loan assets from the Indonesian Bank
\nRestructuring Agency (IBRA).<\/p>\n
Elsewhere, Burhanuddin said that the condition of the
\ncountry's banking industry through the first half of the year had
\ncontinued to improve as reflected in the strengthening of the
\ncapital adequacy ratio (CAR) to an average level of 24 percent in
\nApril from 22.5 percent at the end of last year.<\/p>\n
CAR is the ratio between capital and risk-weighted assets.
\nBank Indonesia's minimum CAR requirement is 8 percent. The
\nhigher the CAR, the healthier the bank is.<\/p>\n
Meanwhile, non-performing loans (NPL) during the same period
\ndeclined to 0.4 percent from 2.1 percent.<\/p>",
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