Local private banks extend more loans than state banks

JAKARTA (JP): Loans provided by private domestic banks during the first quarter of this year increased by 6.95 percent, far higher than the 2.65 percent growth of loans provided by state banks in the same period.

According to a weekly report by Bank Indonesia, outstanding loans provided by private domestic banks increased by 6.95 percent to Rp 64.61 trillion (US$29.91 billion) as of the end of March and from Rp 60.41 trillion as of the end of last year.

In comparison, credits extended by state banks increased by 2.65 percent to Rp 73.66 trillion from Rp 71.76 trillion in the same period.

Foreign banks operating in Indonesia recorded a 4.30 percent increase in credits to Rp 12.12 trillion from Rp 11.61 trillion, while provincial development banks noted a 0.84 percent decrease to Rp 3.52 trillion from Rp 3.55 trillion.

The report shows that overall banking credits within the first quarter of this year only noted a 3.28 percent increase.

A banking observer, Rijanto Sastroatmodjo, said the decrease in credit growth at state banks was not caused by rumors about increases in problem loans but was mainly caused by internal problems in the banks themselves.

Rijanto said consolidation programs in the state banks have also caused them to hold back their credit expansion.

However, Rijanto is pessimistic that the government's total credit expansion prediction of 18 percent will likely be achieved during this fiscal year.

"The figures indicate that the state banks' role in financing development programs has been replaced by private domestic banks." Rijanto was quoted by Bisnis Indonesia daily as saying.

Deposits

Bank Indonesia's weekly report also shows that the funds generated by state banks and provincial development banks in the forms of deposits and other kinds of savings during the first quarter dropped by 3.77 percent and 3.35 percent respectively.

The funds generated by state banks decreased from Rp 61.68 trillion as of the end of last year to Rp 59.35 trillion as of the end of March and those by provincial development banks from 4.77 trillion to Rp 4.61 trillion.

Meanwhile, both private domestic banks and foreign banks operating in Indonesia reported increases in their generation of funds. Private domestic banks recorded a 6.21 percent increase from Rp 67.39 trillion to Rp 71.58 trillion and foreign banks a 1.48 percent increase from Rp 8.09 trillion to Rp 8.21 trillion.

Rijanto said the decrease of the fund collection in state banks was caused by the low interest rates they offer.

"State banks, whose capital adequacy ratios (CAR) are low, believe that there is no reason to generate excessively large amounts of funds if they cannot channel them for credits," Rijanto said.

He said private domestic banks can offer higher interest rates because their CARs are at convenient levels, about nine percent to 15 percent.

The government has required commercial banks to maintain their CARs at eight percent by the end of this year.(02)