41 banks fall short of lending limit requirement

41 banks fall short of lending limit requirement

JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono
said here yesterday that 41 of the country's 240 commercial banks
were still unable to meet the legal lending limit requirement as
of March this year.

"This is far less than the 70 banks reported in October 1995,"
the central bank's governor told Commission VII of the House of
Representatives (DPR) in a hearing.

Soedradjad attributed this sharp drop to the decline in
lending to owners or subsidiaries of the banks.

He said that the average capital adequacy ratio (CAR) of the
country's commercial banks was 12 percent as of March this year,
exceeding the minimum requirement of 8 percent.

The number of banks which had yet to meet the minimum CAR
standard declined to 15 in March from 21 last December, he said

He explained that the number of foreign exchange banks which
failed to meet the net open position of their foreign exchange
was 12, or around 9.2 percent of the total number of such banks.

The net open position of foreign exchange banks should be
maintained at a minimum of 25 percent of their equity, he said.

Soedradjad said that as of March, 23 banks had loan to deposit
ratios (LDR) above the maximum 110 percent. "The LDRs of 80.6
percent of banks were far below the maximum," he added.

In yesterday's hearing, he said that the central bank would
continue to closely monitor the implementation of the prudential
regulations, especially those related to the minimum CAR
standard.

According to the new capital requirement, a bank must increase
its paid-up capital to at least Rp 150 billion if it wants to
upgrade its status to that of a foreign exchange banks. In
addition, their CAR should reach 10 percent.

Those already licensed as foreign exchange banks should raise
their paid-up capital to at least Rp 50 billion, with CARs of at
least 9 percent by September next year. The capital and CAR
should be further increased to Rp 100 billion and 10 percent by
September 1999 and to Rp 150 billion and 12 percent by September
2001.

There are 240 commercial banks here at present. 77 of them are
licensed as foreign exchange banks, which allows them to
participate in foreign exchange transactions and in the
international banking system. The remaining 163 banks are still
categorized as non-foreign exchange banks, with paid-up capital
ranging from Rp 10 billion to Rp 15 billion. (hen)