BI warns of rising bank NPL

BI warns of rising bank NPL

Bank Indonesia said that gross non-performing loans (NPLs) in
the country's banking sector had increased to 8.3 percent during
the first quarter of this year.

Bank Indonesia Governor Burhanuddin Abdullah, however, said
that net NPL had declined to 2.6 percent.

"BI has been observing an increase in NPL since February last
year," he said, pointing out that the increase was contributed by
both new loans and unrestructured loan assets acquired from the
now-defunct Indonesian Bank Restructuring Agency (IBRA).

The central bank has set a 5 percent NPL limit for the banking
sector to help ensure the health of the industry, which has just
started to recover from the late 1990s financial crisis.

Burhanuddin also said that there had been a rising trend among
depositors to switch their funds from bank time deposits to bonds
and foreign exchange investment.

This was mainly caused by the sharp decline in time deposit
interest rates, forcing depositors to seek alternative
investments offering better returns.

According to the central bank, some Rp 15 trillion worth of
funds had been switched from bank deposits into bonds during the
first quarter of this year, and another Rp 7 trillion into forex
investment.

Burhanuddin said the central bank is closely monitoring the
situation to avoid a negative impact on the banking industry. --
JP