Banks urged to boost role in economy
Banks urged to boost role in economy
Urip Hudiono, The Jakarta Post, Jakarta
The central bank is expecting the country's banking industry to
maintain its solid performance for this year, with the growth in
lending likely to outpace that of banks' third-party liabilities.
The solid lending growth, head of Bank Indonesia's directorate
of banking credentials and information Siti Ch. Fadjrijah said,
was expected to help raise the capital adequacy of the banks,
while keeping their non-performing loans (NPLs) in check.
Speaking during a discussion on the country's economic
prospects here on Wednesday, Siti said that bank lending in the
country was estimated to grow between 20 to 25 percent this year,
far outclassing the growth of their third-party liabilities -- of
public savings and deposits -- estimated at some 6 percent.
"The lending includes some Rp 70 trillion (US$7.5 billion)
that banks will disburse to small and medium-sized enterprises
(SME) according to their business plans for this year," she said.
"The growth in credit will hopefully drive the nation's real
sector further ahead amid stabilizing macroeconomic conditions,
while giving handsome profits to the banks themselves."
The revelation should provide a respite for domestic banks,
which have been criticized for failing to increase their
investment in the slow growing economy.
The banking sector has been reproached, some say unfairly, for
its reluctance to expand credits to the trade and manufacturing
sectors, preferring instead to invest its money in government
bonds, or Bank Indonesia's one-month promissory notes (SBI).
Data from BI shows that bank lending in the country reached Rp
595.1 trillion in 2004, up 24.7 percent from Rp 477.2 trillion
the year before.
Third-party liabilities of the banks, meanwhile, rose 8.4
percent to Rp 963.1 trillion last year, from Rp 888.6 trillion in
2003.
That means, on a yearly basis, the banking sector has extended
loans of a much higher value than that the money it has obtained
from deposits and public savings.
The average loan-to-deposit ratio (LDR) of banks still stands
at 50 percent, while non-performing loans stand at 1.7 percent.
Their capital adequacy ratios (CAR), meanwhile, are at an average
of 19.4 percent. BI requires all banks to maintain a CAR of above
18 percent and NPLs of below 5 percent.
Siti said the banking industry was still facing many
challenges to achieving growth this year, mainly in conducting
good governance principles in their businesses.
For its part, Siti said BI would continue to improve the
country's banking industry structure according to its Indonesian
Banking Architecture (API) and international Basel principles of
banking.
Concerning the implementation, Siti said that a majority of
banks in the country are aiming to become limited banks with a
minimum capital of Rp 100 billion.
Under the API restructuring plan by 2010 the country will have
only three international banks with capital of more than Rp 50
trillion each, five national banks with capital of between Rp 10
trillion and Rp 50 trillion, 30 to 50 specialized banks with
capital of between Rp 100 billion and Rp 10 trillion, and limited
banks with capital of up to Rp 100 billion.