New bank loans in August up 25 percent: BI
The Jakarta Post, Jakarta
Bank Indonesia said on Wednesday that new bank loans increased by 25 percent, to Rp 9.5 trillion (US$1.07 billion) in August from Rp 7.6 trillion in July.
The central bank said that the higher loans were made possible because of a decline in domestic interest rates.
"Of the new loans, Rp 3.2 trillion was provided to small-scale businesses," the central bank was quoted by Dow Jones as saying.
Bank Indonesia said that outstanding bank loans rose to Rp 369 trillion in August from Rp 357.4 trillion in July.
In comparison, outstanding bank time deposits and savings increased to Rp 808 trillion from Rp 791 trillion in July.
New bank lending started to increase recently after it had virtually come to a halt following the late 1990s financial crisis.
The central bank has been guiding its benchmark interest rate downward since the start of the year amid a diminishing inflationary threat and stronger exchange rate of the rupiah.
The interest rate on one-month Bank Indonesia SBI promissory notes has fallen to around 14.07 percent, from more than 17 percent at the beginning of the year. This has allowed banks to cut their lending rates to about 18 percent, from more than 22 percent earlier this year.
But analysts said that despite the decline in domestic interest rates and a higher new lending figure, the country's corporate sector was still finding it difficult to obtain bank borrowing for working capital.
Experts said that a sizable proportion of new bank loans was mostly in the form of consumer loans.
Domestic banks, which are still struggling to recover from the devastating financial crisis, are still less enthusiastic about agreeing new loans to the corporate sector as the latter still owes a huge amount in bad debts.
The revival of bank lending is a crucial element in efforts to push for higher economic growth, which, this year is projected at 4 percent, and next at 5 percent.
Meanwhile, bankers said that the current lending rate of around 18 percent was still deemed to be expensive by the business sector.
"I think more lending could be channeled to the business sector if the SBI rate falls below 14 percent," a senior banker said.
Bank Indonesia said there was still more room for it to lower further its benchmark interest rate toward the end of this year on the back of lower inflation.
"For the coming months Bank Indonesia sees inflation continuing to fall, the rupiah to strengthen and the money supply to come under control. Therefore, Bank Indonesia see more scope for easing monetary policy," the bank's board of governors said in a statement.
At the Wednesday weekly, the interest rate of the one-month SBI notes fell to 13.78 percent from 14.07 percent in the previous week.