Bank loans increased in Q3: BI

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.