Banks asked to form debt restructuring unit
JAKARTA (JP): Indonesian banks are obliged to set up special working units to restructure their non-performing loans before Feb. 12, 1998, according to Bank Indonesia.
Detailing its November ruling on bank credit restructuring guidelines, the central bank said the working units should be staffed by people unconnected with decisions to issue the loans.
Muchlis Rasyid, deputy chairman of the Jakarta Initiative Task Force on debt restructuring, who is in charge of restructuring more than Rp 691 trillion in private sector debt owed to domestic banks, explained the loan guidelines to bankers here on Wednesday.
The guidelines stipulate that banks are allowed to provide debtors with seven restructuring incentives, including lower interest rates, a reduction of unpaid interest, debt relief, payment extension, new financing facilities, debt-for-asset swaps, and debt-for-equity swaps.
Banks also have limited scope to provide additional restructuring incentives and are allowed to demand greater protection for their loans.
However, Bank Indonesia has stated that only viable debtors are eligible for the incentives because the main objective of the restructuring process is to improve the business performance of debtors and secure repayment of their debts.
Muchlis said that so far 57 companies with a combined debt of Rp 15 trillion owed to domestic banks had sought to make use of the restructuring incentives.
"Two companies have agreed restructuring deals," the former managing director of Bank Indonesia told reporters after the gathering.
Jakarta Initiative Task Force chairman Jusuf Anwar said last month that the new ruling had been made to help banks enter into restructuring deals.
"This should help to appease bankers' fears that they will be accused of KKN if they offer to forgive or restructure debts owed to them," he said.
KKN is an Indonesian acronym for corruption, collusion, and nepotism.
Restructuring the country's banking sector is a key to the recovery of the crisis-hit economy. (rei)