New bank loans jump 11.6% in September

New bank loans jump 11.6% in September

Dow Jones, Jakarta

The Indonesian central bank said Friday that falling domestic interest rates continued to spur new bank loans in September.

New bank loans jumped 11.6 percent to Rp 10.6 trillion (US$1.15 billion) in September from Rp 9.5 trillion in August. Outstanding bank loans rose to Rp 387.7 trillion from Rp 377 trillion a month earlier, as a result.

Most of the new loans were provided to small businesses, the central bank said.

New bank loans had virtually came to a halt following the 1997-1998 Asian financial crisis, which crippled domestic banks. Also, soaring interest rates and rising nonperforming corporate debts in the wake of the crisis effectively put a lid on new bank lending.

Bank Indonesia has cut the benchmark average rate of its one- month Sertifikat Bank Indonesia notes to the current 13.10 percent from around 17 percent at the beginning of 2002, with inflationary pressures easing and the rupiah gaining ground against the dollar.

Consequently, banks have reduced their lending rates to between 17 percent and 19 percent currently from over 22 percent earlier this year.

Bankers said most of the new loans have been consumer loans, as expected, with private spending resilient over the last three years. What's lacking is fresh lending for new capital investments. Higher capital spending is needed to help the country's economy achieve a growth rate of 5 percent, which Indonesia needs to create enough jobs to alleviate the country's severe unemployment problem, they said.

In September, Bank Indonesia said, outstanding time deposits and savings rose to Rp 815 trillion from Rp 811.2 trillion in August.