BI expects 20% bank lending growth this year
BI expects 20% bank lending growth this year
The Jakarta Post, Jakarta
Bank lending this year is expected to grow by more than 20
percent, partly driven a by steady but slow improvement in the
domestic business climate, Bank Indonesia deputy governor Maman
H. Sumantri says.
The improving growth had been accompanied by an improved
performance in key banking indicators, signaling the banking
sector was on the right track towards a full recovery, Maman said
on Thursday.
"Performance indicators in the banking sector such as third-
party funds, NPL, CAR, profitability and LDR, have been
improving. So is credit, which we estimate to grow by more than
20 percent this year," Maman said.
NPL, or non-performing loans, are on the decrease, while CAR,
or capital adequacy ratio; a comparison between a bank's capital
with its risk-weighted assets such as loans; and LDR, the
lending-to-deposit ratio, are strong.
All are key indicators to gauge a bank's health. As of the
third quarter of the year, on average, NPLs stood at around 2
percent; below the maximum 5 percent allowed by the central bank,
while CAR reached 21 percent; well-above BI's minimum requirement
of 8 percent.
As for credit, it had reached Rp 555.1 trillion (about US$61
billion) by the end of September, or a 17 percent growth from the
position at the end of last year.
"It (lending growth) will move higher in accordance with a
steady rise in the LDR and by year-end, the ratio would likely
reach 50 percent," he said.
In September, LDR averaged at about 45 percent.
Lending from the banking sector, especially to the corporate
sector, has been slow in past years.
Banks have become more cautious about lending after being
badly burned in the late-1990s banking crisis. There is also a
relatively low demand for loans from the already indebted
corporate sector.
Calculations show bank lending needs to grow by 22 percent to
support an economic growth of 5 percent. The current trend
coupled with intensifying efforts to speed up the restructuring
of the country's corporate sector meant such growth should be
within reach next year, Maman said.
The government is targeting an economic growth rate of 5.4
percent in 2005.
Maman said the central bank was drawing up measures to tailor
packages for the corporate sector, which would in turn boost
demand for loans.
On top of the list of the bank's priorities was to find a way
to deal with the problems hampering the banking industry.
"We've been conducting a survey which will be completed early
next year. This will become a map for our industry, which will
help the government prioritize what actions need to be taken to
speed up the sector's recovery."
BRI set to expand credits
State-owned lender Bank Rakyat Indonesia (BRI) is planning to
expand credits to small- and medium-sized enterprises (SMEs) by
20 percent next year, bank president Rudjito said on Thursday.
Currently, the bank's lending exposure to SMEs accounted for
around 86 percent of its total credit of Rp 55 trillion, Rudjito
said, making it the largest player in the micro-credit sector.
He confirmed the bank was waiting for approval from the
ministry of finance about its proposal to write off SME debts
amounting to Rp 500 billion.
The figure was among the 13.5 trillion worth of SME debts that
are being considered for write-offs by the ministry . -- JP