BI sees 20% loan growth this year

BI sees 20% loan growth this year

The Jakarta Post, Jakarta

The central bank estimates growth in bank lending will
increase by about 20 percent this year, as banks reduce their
investments in Bank Indonesia SBI promissory notes.

However, Bank Indonesia deputy governor Maman Sumantri
acknowledged on Tuesday most of the loans were going to the
consumer, not the corporate, sector.

He urged banks to lend more money to corporates to help
accelerate the country's economic growth.

"We don't want bank loans only concentrated on sectors that
are consumptive." Targeting corporate investment would have a
significant impact on the economy, Maman said.

Bank loans were growing at an average of 20 percent, with
growth in lending to the consumer sector outpacing lending for
investment and working capital, he said.

"On average, annual growth for consumption credits reached
40.3 percent, far higher than the 11.7 percent growth for
investment credits and the 10.4 percent for working capital
credits," central bank director for banking research and
regulations Nelson Tampubolon said.

Nelson and Maman said banks had improved their performance as
intermediaries in the corporate sector since the near-collapse of
the banking industry during the 1997-1998 economic crisis.

The industry's loan-to-deposit ratio (LDR) -- the ratio
between the credits banks extend and the deposits they receive
from the public -- has been increasing since 1999, a year after
the crisis.

In 1999 the LDR stood at 26.2 percent, and by the end of last
year it had climbed to 43.2 percent.

"The figures have kept improving this year, with the LDR as of
June reaching 46.8 percent," Maman said.

However, the ratio is still far lower than before the crisis,
when it peaked at 82.6 percent.

Maman said bank funds placed on the SBI had declined this
year, from Rp 130.4 trillion in January to Rp 52.98 trillion as
of last month.

Bank Indonesia has been guiding down the interest rate on SBI
notes during the past year. The one-month SBI rate is now at a
record low of 7.39 percent.

Banks should look again to corporates as an investment, he
said. "This is a good chance to boost productive lending and
generate more robust activity in the real sector," Maman said.

Lack of bank loans to the corporate sector is seen as one of
the major reasons for the country's sluggish economic growth
during the post-crisis years.