Bank loans increased in Q3: BI
The Jakarta Post, Jakarta
The country's commercial banks continued to increase new loan disbursements in the third quarter of the year, as improving economic conditions have made lending more profitable, according to a central bank survey of 50 banks.
Bank Indonesia data on its website shows that approved fresh bank loans in the third quarter grew by 55.3 percent from the same period last year, although the growth rate was slower than the previous quarter's 69.1 percent.
But the central bank expected new bank loans to increase by nearly 59 percent in the fourth quarter.
The survey revealed that a huge portion of the approved loans during the third quarter period were for working capital (72.3 percent), consumer loans (19.2 percent) and for investment (8.5 percent).
It added that the lending growth mostly occurred in the large bank category, as medium-sized banks and smaller banks saw a decline in new loans.
Bank Indonesia, for the past couple of years, has been guiding down the domestic interest rate in a bid to make bank loans more affordable and increase bank lending to help push economic growth higher.
But while the central bank benchmark rate is now at a record low of around 7.41 percent, there has been criticism recently that many banks, which have started to recover from the impact of the late 1990's financial crisis, remain reluctant to boost lending to the corporate sector amid slow progress in the restructuring of corporate debts. This is reflected in the fact that the banking sector's loan to deposit ratio of less than 50 percent is still far from the pre-crisis level of around 80 percent.
Elsewhere, the survey also revealed that demand for loans increased during the third quarter, and is expected to continue to increase in the fourth quarter amid a low interest rate environment. The loans will be used for working capital (86.4 percent), investment (2.2 percent), and consumption (11.4 percent), mostly for the purchase of housing and automotive vehicles.
The central bank also said the average interest rate that banks charged for loans in a bid to supplement working capital dropped to 14.1 percent in the third quarter from 14.5 percent in the second quarter.
Bank Indonesia predicted the rate would fall further to around 13.8 percent in the fourth quarter.