Banks financial condition improving, but lending remains slow: BI
Banks financial condition improving, but lending remains slow: BI
The Jakarta Post, Jakarta
Behind the apparent progress made by the banking sector in
improving its financial health, the slow growth in lending to the
private sector remains a major concern, according to the central
bank's assessment.
Speaking on Tuesday before the legislators at House Commission
IX on financial affairs, Bank Indonesia Governor Burhanuddin
Abdullah said such a condition had resulted in huge overliquidity
in the banking sector.
"Today, the sector has some Rp 200 trillion (US$23.67 billion)
in excess liquidity; some Rp 140 trillion of which is invested in
SBI (Bank Indonesia promissory notes). Banks then enjoy Rp 12
trillion to Rp 16 trillion in interest payments.
"This has created a sort of circle for some time now, which is
unhealthy. Some part of the money is supposed to go to
corporations to help fuel the economic wheels," he explained.
In its latest report, the central bank said that new loans in
the first eight months of this year only grew by 1.83 percent
compared to the same period last year. The new loans stood at Rp
50 trillion, which accounted for some 57.3 percent of the planned
full-year lending volume, from Rp 49.1 trillion in the same
period last year.
The increase, Burhanuddin said, was far than enough for the
industry to play significant role in speeding up the economic
growth.
"The bank loans need to grow between 20 percent to 22 percent
per annum to be able to push economic growth to around 5
percent," he said.
Indonesia's economy, which has been growing by 3 percent to 4
percent in the past couple of years, could use a boost from
robust productive activities to help it achieve higher economic
growth. But the slow growth in lending provides little ammunition
for the sector to do so.
Analysts and bankers have said that the country's corporate
sector is still deemed risky, as its debt restructuring process
remains slow. Most banks are consequently focussing their loans
more on consumers -- which includes credit for individuals and
small and medium-sized enterprises (SMEs) -- rather than for the
corporate sector.
One important development that should also be taken into
account is the fact that many corporations are turning to
alternative financing sources other than banks. Corporate bonds
issue has been among the favorites. More than Rp 20 trillion
worth of corporate bonds had been issued as of September.
Elsewhere, Burhanuddin also said the slight improvement in
lending was a stark contrast with progress made by banks in
improving their financial health.
Bank's third-party funds in the banking sector had grown by
0.7 percent as of August, while the average capital adequacy
ratio (CAR) was at 26 percent, far above the central bank's
minimum requirement of 8 percent. The return on assets (ROA) of
banks also stood at a relatively healthy 2.4 percent.