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.