Debt repayment before maturity favorable

JAKARTA (JP): The recent trend of large borrowers repaying debts before maturity will not affect the banking industry. It will instead help provide equal distribution of loans to smaller businesses, a noted economist said.

Rizal Ramli, the managing director of a consulting and research agency Ekonit, acknowledged yesterday that the early repayments might cause a temporary glut in the banks.

"But, the banks can channel the funds through the interbank money market or buy commercial papers. They have a lot of investment options," he said, adding that there is no need to fear the possibility of oversaturation.

Trenggono, chairman of the Association of Private Domestic Banks, shared Rizal's view saying yesterday that a bank's income does not come only from the loans it extends.

He said that many banks in advanced countries channel only 50 percent of their total funds to creditors, while the rest of the funds could be allocated for investment in commercial papers or other business instruments.

Rizal Ramli expressed his happiness in the recent trend of debt repayments by large borrowers, saying that the banks' funds will eventually go to smaller businesses.

He said that the concentration of the allocation of banks' loans to a limited number of large borrowers is not healthy for the country's economic condition.

He commented that the allocation of banks' funds for a few people is only possible with the existence of collusion between bankers and borrowers and other illegal practices.

He said that the Golden Key Group case, which brought the group's owner, Eddy Tansil, to serve 17 years in jail, has compelled large borrowers to repay their debts before maturity.

The case will lead banks to extend their funds to smaller businesses and that will eventually make distribution of loans more equal than before, he added. (05)