BTN to cut lending rate to 13.5%

The Jakarta Post, Jakarta

State Bank Tabungan Negara (BTN), which specializes in house loans, plans to lower its interest rate on lending starting next month, the bank's president said.

BTN president Kodradi said on Monday the lending rate would be cut to about 13.5 percent to 14.5 percent from the current rate of 15 percent to 16 percent.

Speaking following a closed-door meeting with the banking subcommission of House of Representatives Commission IX on financial affairs, Kodradi said BTN could not afford a larger rate cut due to its debt burden and the threat of nonperforming loans (NPLs).

There had been hopes that BTN would make a more aggressive cut to its lending rate, particularly because the central bank has significantly cut its benchmark rate to about 7 percent from more than 13 percent last year.

But Kodradi said BTN would have to allocate a huge amount of money to cover the interest rate burden of its recent Rp 1 trillion bond issuance.

He said the bank's gross nonperforming loans stood at about 4.9 percent as of May, higher than the gross level of 3.8 percent in 2003.

"But if the NPLs increase again, the bank may have to raise its lending rate," Kodradi said.

However, he said that despite the reduction in the lending rate, the bank could still enjoy a profit this year.

"What is more important is that our bank can resume its intermediary role," he said.

The central bank has encouraged banks to increase lending to the corporate sector to help boost economic activity at home. But most banks remain reluctant to boost lending to the corporate sector due to lingering risks.

Kodradi said BTN was able to surpass the 2003 lending volume target of Rp 2.1 trillion, booking Rp 3.3 trillion in lending for the year.