Bank BNI defends Texmaco Group loans

Bank BNI defends Texmaco Group loans

JAKARTA (JP): State Bank BNI president Widigdo Sukarman
defended at the weekend the bank's huge Rp 9.6 trillion (US$1.35
billion) loans to the textile conglomerate Texmaco Group, saying
the loans had been extended under appropriate procedures.

Widigdo said in a statement that the drop in the quality of
the credit was in line with the deterioration in the country's
economic condition.

But he said that this would not affect the bank's total
recapitalization cost -- currently estimated at Rp 52.8 trillion
-- because BNI had already provided a 100 percent provision
against the loans.

"The Texmaco group has been a BNI customer since 1996, and it
has now become one of BNI's troubled debtors," he said.

Widigdo made the statement following a report made on Friday
by the Kontan economic weekly on the controversial loan.

The report said BNI did not transfer the bad loans to the
Indonesian Bank Restructuring Agency (IBRA), as stipulated under
a decree on the government bank recapitalization program.

The Jakarta Stock Exchange suspended on Friday trading on the
shares of the publicly listed BNI during the start of the second
trading session, but the exchange revoked the suspension at 3
p.m. after it received clarification from the bank.

Widigdo said that the bank did not turn over the Texmaco loans
to IBRA because according to the December 1998 and June 1999
financial reports the loans were still in "category four, or
doubtful" loans. Loans which must be transferred to IBRA are
those which fall under category five, or bad loans.

BNI handed over in March Rp 24.3 trillion in bad debts to IBRA
in order to be eligible to join the government bank
recapitalization program.

Widigdo said the Texmaco Group was currently in the process of
restructuring the BNI loans.

On the accusation that the huge loans made to a single group
effectively meant that BNI had violated the central bank's legal
lending limit ruling, Widigdo said: "In this case Bank BNI
received permission from the authority."

Widigdo did not elaborate on the statement.

It is common knowledge that state banks were frequently
treated as the cash cow of corrupt politicians and well-connected
businessmen.

M. Manimaren, a brother of Texmaco owner M. Sinivasan, has
been accused of involvement in the high-profile Bank Bali
scandal.

The scandal centers around the "illegal" transfer of some
US$80 million -- a very small sum compared to the Texmaco loans
-- from the bank to a private firm linked to the Golkar political
party. The funds were allegedly to be used for political purposes
ahead of the October presidential election.

Manimaren is a Golkar treasurer.

A court is currently handling the case.

Meanwhile, a government source said some of the Texmaco loans
were already in the category five for loans. The source said the
loans were transferred in March to IBRA, but were later taken
back by BNI.

The source speculated that Texmaco influenced BNI to take back
the loans because the textile group faced a tough debt
restructuring deal which included a possible litigation measure
under IBRA if the loans were in the hands of the agency.

"At least, IBRA would charge Texmaco a commercial interest
rate for the loans," the source told The Jakarta Post.

IBRA currently controls more than Rp 230 trillion worth of bad
loans received from various banks including closed down bank and
banks to be recapitalized.

The government has so far closed down 66 banks, nationalized
11 banks and recapitalized eight banks in a bid to restructure
the country's ailing banking industry.

Bank BNI is scheduled to be recapitalized in March next year.
The government has twice postponed the recapitalization program
of the bank. (rei)