Bad loans at banks still rising

Bad loans at banks still rising

JAKARTA (JP): Bad loans at the country's commercial banks
increased to 3.97 percent of outstanding credits as of last
January, from 3.88 percent last September and 3.53 in March last
year.

Governor of Bank Indonesia (the central bank) J. Soedradjad
Djiwandono disclosed the increase at a hearing with the Trade and
Finance Commission of the House of Representatives yesterday.

The governor did not give real figures for the bad loans
however, saying that the increase generally did not represent the
actual development at commercial banks.

According to the central bank's weekly report dated Feb. 15,
commercial banks' credits stood at Rp 187.61 trillion last
December.

Hedrobudiyanto, managing director of Bank Indonesia, explained
that commercial banks' bad loans recorded by the central bank
between September 1994 and January 1995 reached Rp 900 billion
(US$409 million).

However, Hendro noted that the newly recorded bad loans might
have occurred long before the September to January period but the
central bank only discovered them during the period.

"Figures for bad loans may increase further, not because of a
real increase in loans going sour but because of new findings
from our on-site examinations," he added.

Soedradjad said that despite the increase in bad loans,
problem loans decreased to 9.14 percent of the total outstanding
credits as of January, from 9.5 percent last September and 9.92
percent in December 1993.

Collectibility

He said the collectibility rate of loans provided by
commercial banks increased to 87.34 percent of their outstanding
credits as of January, from 86.94 percent last September and
85.83 percent in December 1993.

The average capital adequacy ratio of the country's banks rose
to 12.5 percent last December from 9.9 percent at the end of
1993, while the number of banks which observed legal lending
limits increased to 81 percent from 75 percent in the same
period.

Soedradjad said that Indonesian banks had slowed down their
extension of loans to the property sector because the sector has
been blamed as the most possible stimulant of economic
overheating.

The growth of credits extended to the property sector last
January dropped to 1.8 percent from an average of three to 4.9
percent a month within the April to December period of last year.

When asked about Bank Indonesia's efforts to curb future
increases in bad loans, Soedradjad said that the central bank
will soon issue commercial banks guidelines in formulating credit
policies.

"Commercial banks will have to follow these guidelines when
formulating their credit policies," he said. "The guidelines are
expected to improve the banks' internal supervision and the
quality of their loans."

He explained that the guidelines will include the tasks and
authority of banks' commissioners, procedures for loan approval,
ways to evaluate credit, credit supervision systems and
procedures to settle bad loans. (rid)