BII to reduce credit growth to 20% in 1995
BII to reduce credit growth to 20% in 1995
JAKARTA (JP): The publicly listed Bank Internasional Indonesia (BII) plans to limit its credit growth to 20 percent this year, down from a 25 percent expansion in 1994, says the bank's president, Indra Wijaya.
Indra said here yesterday the move to reduce the bank's credit ceiling would be made in line with the government's policy to slow down credit expansion in the banking system.
He said, however, that the lower credit growth would not affect the earnings of BII, a major private bank.
"The bank's profit growth will be maintained at around 25 percent despite slower credit expansion," he told newsmen following the launching of Eka Life Master Card, a credit card specially issued for policy holders of Eka Life, the bank's affiliated insurance company.
The government plans to slow down credit expansion in the banking industry to 19 percent in the 1995-96 fiscal year, which will begin in April.
Indra said that most of the cuts in BII's credit growth will be made in loans to the overheated property sector. Loans to other sectors will be managed more prudently to avoid any increase in bad debts, which account for less than one percent of BII's outstanding loans, he said.
Credits
Credits of BII, which is listed on the Jakarta and Surabaya stock exchanges, rose nearly 50 percent to Rp 5.9 trillion (US$2.74 billion) as of June 1994 from Rp 3.94 trillion as of June 1993, according to the bank's consolidated financial reports.
The bank's profit level rose by 29 percent to Rp 105.99 billion in 1994 from Rp 82.02 billion in 19933.
Indra supported the government's tight credit policy as an effective means of curbing stronger inflationary pressures, which have been predicted for the next fiscal year.
The inflation rate reached 9.24 percent last year, compared to 9.77 percent in 1993.
Economists estimate that the inflation rate could surpass the 10 percent level next year if stricter controls are not put in place. New measures are necessary to reduce the inflationary effects expected from a likely increase in consumer demand following a rise in the salaries of civil servants, military personnel and industrial workers early this year, as well as the faster growth in new factory construction.
However, Indra said that the credit crunch would not result in higher interest rates.
Private bank deposit interest rates are between 13 and 15 percent per annum at present and their lending rates range between 17 percent and 20 percent.
"The country's interest rates are more sensitive to rises in interest rates in the U.S than the government's decision to reduce bank credit expansion," he said.
Some businessmen fear that the tight credit policy will further push up lending rates, as investors will be more reliant on loans from local banks.
In the next fiscal year, the government also plans to impose stricter controls on the offshore borrowing activities of private companies in order to curb the country's widening current account deficit.(hen)