Bank Mandiri seeks House approval for debt write-off proposal
Bank Mandiri seeks House approval for debt write-off proposal
The Jakarta Post, Jakarta
The nation's largest lender, Bank Mandiri, will seek approval
from the House of Representatives to write-off its troubled
credits totaling Rp 21 trillion (US$230 million) in a move to
ease the huge burden on its financial balance.
Nimrod Sitorus, the bank's director and corporate secretary,
said on Tuesday that such a move would allow the bank to erase
the troubled loans from its balance sheet, meaning that it would
no longer have to allocate huge provisions to cover for them.
"However, it has to be understood that a write-off does not
mean the loans become uncollectable. Mandiri will retain the
right to collect the money, along with the collateral, but at a
reduced amount.
"So basically, it's a hair-cut for the debtors," said Nimrod
during a breaking of the fast gathering.
The government is eligible in certain circumstances to grant a
debt write-off through a presidential decree, but only for debts
worth below Rp 100 billion.
"More than that, they should be approved by the House. That's
what we intend to do," Nimrod said, adding that the bank expects
to meet the legislators by the end of the year.
Some of the troubled loans are ones that were the subject of
lengthy legal disputes.
But Nimrod said that none of the debts had come from loan
assets the bank bought from the now-defunct Indonesian Bank
Restructuring Agency (IBRA).
Bank Mandiri was among the most active lenders that managed to
purchase non-performing loans (NPLs) taken over by IBRA from the
banking sector during the crisis.
Of the total bad loans, Nimrod said, Rp 4.6 trillion were
those of an individual size of below Rp 5 million and, thus, are
categorized as loans owed by small and medium enterprises (SMEs).
As for the recovery-rate target, the bank is hopeful of
recovering around 30 percent to 50 percent of the outstanding
debts.
"Such a scheme is actually a win-win solution, both for the
banks and debtors. Although at discounted prices, banks can cash
in the debts that have long been idle, and perhaps start making
money out of them.
"It would also be helpful for debtors, as surely they will not
want to remain on the banks' blacklists forever," he said, adding
that the target should be realistic as much of the collateral was
of a fairly high value, such as land and buildings.
Meanwhile, it was also revealed that, as of June 2004, the
bank had unloaded some Rp 61 trillion of Rp 173 trillion worth of
recapitalization bonds it received from the government during the
financial crisis.
As of the first half of the year, the bank's recapitalization
bonds stood at Rp 102.3 trillion.
"We sold them to the bond market and replaced them with more
productive assets, such as loans. We are using the proceeds to
cover the high interest we have to pay to our depositors,"
Kartika Wirjoatmojo, vice president of the bank's strategy and
performance division, said.