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)