BI to evaluate banks issuing credit cards
BI to evaluate banks issuing credit cards
Leony Aurora, The Jakarta Post, Jakarta
In light of the robust growth of consumer spending and credit
expansion in Indonesia, the central bank is to review banks
issuing credit cards to limit the risk of bad lending.
Bank Indonesia (BI) would review the banks' credit risks
management, information technology systems and examine how they
explained their services to customers, BI deputy governor Maulana
Ibrahim said at the sidelines of a hearing with the House of
Representatives' Commission XI on financial affairs on Monday.
"We'll prioritize the banks with higher risks, which can be
seen from the number of cards they have issued," he said.
BI would start the evaluation program this year, said Maulana,
without giving a more specific time frame. Sanctions for
financial institutions that violated prudent banking principles
could be as severe as revoking their licenses, he said.
The latest data shows there were about 7.5 million credit card
users in the country in 2004, with about 16 local and
international banks issuing plastic.
Visa International, the market leader in credit cards in
Indonesia, with about 70 percent of the market share, has
estimated that the number of credit card holders may increase by
20 percent this year.
With some 15 million potential customers still untapped and
the economy expected to grow by 5.5 percent this year, banks are
now racing to ease procedures for credit card applications and to
offer attractive value-added facilities.
Analysts have warned lax procedures and a rising number of
credit card users could cause problems with bad loans in the
future -- especially if people became multiple credit card users
on limited incomes.
To better monitor creditors and help them avoid bad debts, BI
plans to establish a credit bureau information system with its
own internal funding.
"I have been promised that within two months, (the credit
bureau) will be operational," BI Governor Burhanuddin Abdullah
said to the hearing.
The bureau will collect credit histories of corporate and
individual debtors from participating lenders. Its database,
called the Debtor Information System (DIS), would help lenders to
obtain more comprehensive information about debtors, Burhanuddin
said.
The system would not only hold information about large
corporate debtors, but also records of individual mortgage
holders and vehicle loans.
"I am positive that this credit bureau will be profitable. In
the future, it should be privatized," Burhanuddin said.
According to the Indonesian Association of Credit Card
Issuers, the cards are used for 10 million to 12 million
transactions a year, worth as much as Rp 30 trillion (US$3.26
billion).
In terms of spending, Citibank, the largest issuer of credit
cards in the country with a 35 percent market share, has
estimated the industry will grow by between 5 percent and 10
percent this year.