OJK: Write-off Policy for MSME Loans Now Permanent

The Chief Executive of Banking Supervision at the Financial Services Authority (OJK), Dian Ediana Rae, has confirmed that the policy of writing off and/or cancelling credit for micro, small, and medium enterprises (MSMEs) can now be carried out without any time limit. This provision is regulated under Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (P2SK). According to Dian, the regulation provides flexibility for banks to write off or cancel non-performing loans permanently.

“Under the P2SK Law, write-offs and write-downs can now be done for a lifetime. That means forever,” Dian said in Jakarta, as quoted on Tuesday (23/6).

He explained that the scope of the policy for writing off bad debts and receivables has also been expanded. Whereas it previously targeted state-owned banks, the rules now also cover government-owned non-bank financial institutions and regional development banks (BPD) or municipally owned banks.

“Secondly, it covers not only state-owned enterprises (BUMN) but also regionally-owned enterprises (BUMD),” Dian stated.

Dian assessed that this policy will help accelerate the process of cleaning up bank balance sheets. According to him, once loan loss reserves (CKPN) have been formed, banks only need to complete the administrative process of writing off non-performing loans so they can refocus on extending new financing.

Dian revealed that bank lending conditions are beginning to show improvement. After experiencing negative growth for several months earlier in the year, credit performance has now turned positive. Although the growth rate is not yet very high, the upward trend is continuing.

OJK emphasised that various efforts undertaken with the banking industry can maintain this momentum so that credit growth can continue to strengthen in the future.

“The latest data shows that after several months of negative growth earlier in the year, it is now positive. Hopefully, it will continue to rise,” he said.

With the implementation of the P2SK Law and the acceleration of non-performing loan resolution, OJK also hopes that the banking condition will become healthier and the space for financing expansion will be more open.

“Then the process of cleaning up the bank’s balance sheet will proceed more smoothly,” Dian concluded.