Bad loans at private banks on decline
Bad loans at private banks on decline
JAKARTA (JP): Bad credits at Indonesia's private banks declined by 6 percent within five months to Rp 1.6 trillion (US$695 million) as of last November, said the chairman of the Federation of National Private Banks (Perbanas), Trenggono Purwosuprodjo.
Trenggono told a hearing with the House of Representatives commission for finance, trade and cooperatives yesterday that the amount of bad loans at private banks decreased from Rp 1.7 trillion, or 0.70 percent of their total credits outstanding in June, to Rp 1.6 trillion in November.
He added that the bad loans as of November represented 0.60 percent of their total outstanding credits.
He acknowledged difficulties in a quick elimination of the bad loans. "But there is still a fair chance for the private banks to decrease them to as low as 0.2 percent," he said.
In comparison, according to the latest Perbanas data, bad credits at the seven state-owned banks increased from Rp 7.3 trillion as of June last year to Rp 7.9 trillion five months later. But in terms of a percentage of their total credits, the bad credits decreased slightly from 3.05 percent to 3.04 percent.
Perbanas groups 164 private domestic banks in the country.
He cited the violation of legal lending limits as one of the main reasons for the bad loans.
The rule on legal lending limits stipulates that lending by a commercial bank to a single customer or a group of companies cannot exceed 20 percent of its capital, while lending to a borrower affiliated with the bank cannot amount to more than 10 percent of its capital.
On the question of interest rates, Trenggono noted that current interest rate levels should be maintained to prevent the outflow of funds to foreign countries.
Currently, deposit rates in private banks are averaging 17 percent per annum, while lending rates are at an average of 21 percent.
"The present high interest rates are only temporary. They are necessary to cool down the overheating economy," he said, adding that the rates should be kept until the overheating problem is resolved. (13)