BRI restructures Rp 3.56t of NPLs

JAKARTA (JP): State-owned Bank Rakyat Indonesia (BRI) said here on Wednesday it had successfully restructured about Rp 3.56 trillion (about US$490 million) of its nonperforming loans (NPLs).

The bank said the figure represented 64 percent of its corporate NPLs, reducing the value of its total problematic loans to Rp 1.96 trillion at the beginning of the year 2000.

The bank expected it would be able to restructure all its remaining NPLs in the next three months.

The bank explained that the Rp 1.96 trillion is a conservative figure, as it uses a stricter standard compared with that used by Bank Indonesia's when categorizing restructured NPLs.

"For instance, based on Bank Indonesia's standard, NPLs are stated to be sound after the signing of a restructuring agreement," BRI said, adding that, unlike the central bank, it often waited for three to six months to evaluate the realization of an agreement with a debtor before revising a credit's status.

The bank said that in restructuring NPLs, BRI required a final cash settlement for every amount due, including the interest payable prior to any debt restructurization program.

The interest rate applied is the one valid at the time of the due date and applicable to both rupiah loans and foreign currency loans.

"If those conditions are met, BRI is willing to write off the penalty interest," it said.

After the completion of a debt restructuring program, BRI then sets a new interest rate, based on the debtors' capability, which is measured by the Internal Rate of Return (IRR). For rupiah loans, BRI sets the IRR at 1 percent higher than Bank Indonesia's three month promissory notes (SBIs). For U.S. dollar loans, the IRR is set at 2 percent higher than the Singapore Inter-Bank Offered Rates (SIBOR). (hen)