New bank loans remain slow: BI
New bank loans remain slow: BI
The Jakarta Post, Jakarta
New bank loans in from January to August of this year grew by
just 1.83 percent from the same period last year, Bank Indonesia
reported on Wednesday, further evidence that the country's
banking sector remains reluctant to channel money to the
corporate sector.
The central bank said in a press statement that new loans
during the first eight months of this year rose to Rp 50 trillion
(US$5.92 billion) from Rp 49.1 trillion in 2002.
The size of the new loans accounted for some 57.3 percent of
the volume planned by the industry for the full year, Bank
Indonesia said.
The central bank has been aggressively cutting its benchmark
interest rate in a bid to push lending rates down, so the
corporate sector can obtain cheaper funds to finance expansion
programs or for working capital. Although the interest rate on
the one-month Bank Indonesia SBI note has fallen to about 8.47
percent from more than 13 percent at the beginning of this year,
lending rates remain stubbornly high at between 16 percent and 18
percent.
Bankers contend that lending to the corporate sector remains
risky as many companies are still saddled with huge bad debts.
Many banks are focussing their lending activities either to small
and medium-sized enterprises (SMEs) or consumers.
Citibank economist Anton Gunawan said the tighter prudential
regulations imposed by Bank Indonesia to prevent another banking
crisis were one reason banks were reluctant to boost lending to
the corporate sector.
He said many banks were now concentrating on SMEs because
large companies were still restructuring their debts.
"But there's an interesting development. As of September,
there has been about Rp 20 trillion worth of new corporate bonds
issued both for working capital and refinancing purposes.
"This means that the corporate (sector) is also looking for
alternative funding sources aside from bank loans," he said.
Anton said bank lending would remain sluggish unless the
corporate sector accelerates its restructuring process.
Elsewhere, Bank Indonesia reported that the overall condition
of the banking sector remained stable, thanks to a relatively
sound monetary condition.
It said third-party funds in the banking sector grew by 0.7
percent as of August, while overall capital adequacy ratio (CAR)
was at a healthy 26 percent, compared to the central bank's
minimum requirement of 8 percent.
The central bank also said that although there would be
inflationary pressure over the next two months because of year-
end festivities, the full-year inflation target of 5 percent to 6
percent was still achievable.
On the rupiah, the central bank forecast the currency would
remain stable against the U.S. dollar, with the chance that it
could strengthen amid an inflow of overseas funds to purchase
local assets, higher interest rates at home compared to overseas
and stronger foreign exchange reserves.
Bank Indonesia maintained its economic growth target of 3
percent to 4 percent for the year.
"The (main) factor for growth remains consumption, although
investment and exports will improve slightly," the central bank
said.