Onshore banks can make overdraft transaction: BI

Onshore banks can make overdraft transaction: BI

JAKARTA (JP): Bank Indonesia deputy governor Miranda Goeltom
said on Thursday the central bank would allow onshore banks to
lend rupiah to offshore banks through the intraday overdraft
facility.

But Miranda said banks must have the Message Type (MT) 210
document before making such transactions.

"As long as a bank already has the MT210 supporting document,
it can make the rupiah transfer," she said during a media
conference.

"The transfer must not surpass the limit set in the MT210,"
she added.

The MT210 document is basically a confirmation from a bank
that it will transfer funds to a recipient bank using the
exchange rate that same day.

"But please do not see this as us loosening the (forex)
ruling ... it is a common banking practice to make transfers
after obtaining the MT210 document," Miranda said.

Miranda was answering questions about a Bank Indonesia
circular containing details of its new foreign exchange ruling,
which limits rupiah transactions between onshore banks and
nonresidents.

Those categorized as nonresidents are foreigners, foreign
institutions, Indonesian citizens with permanent overseas
resident status and overseas branches of Indonesian companies.

The new ruling is aimed at limiting the offshore availability
of rupiah to help curb speculation on the ailing local currency.

The forex ruling has caused some initial confusion among
foreign bankers.

The ruling, issued on Jan. 12, had stated that banks operating
in the country were not allowed to make overdraft transactions
with offshore banks.

Bank Indonesia initially failed to provide details of the
ruling.

Miranda also said that branches of foreign banks in the
country and foreign investment companies set up under Indonesian
law would be treated as residents.

She added that nonprofit international organizations such as
the IMF, Unicef and the International Red Cross also were
categorized as residents.

The new forex ruling stipulates that onshore banks are
prohibited from making certain transactions with nonresidents,
including foreign institutions.

The transactions prohibited include provisions of credit and
overdrafts in rupiah and or foreign currencies to nonresidents;
placement of funds in rupiah with nonresidents, including rupiah
transfers to banks abroad; purchases of securities in rupiah
issued by nonresidents; and interoffice transactions in rupiah.

Under the ruling, a US$3 million cap has been put on
derivative transactions without any underlying investment
purposes between banks and nonresidents. It was previously set at
$5million.

The restriction does not apply when carried out for the
purpose of protecting the value of investments, including direct
investment, securities purchase and credit provisions in
Indonesia by nonresidents.

Miranda said residents who have outstanding rupiah commitments
to nonresidents may still conduct the necessary transactions
until next week.

"The last day is Feb. 7, as long as the rupiah is transferred
to a bank account in Indonesia," she said.

Miranda said there were indications the new forex ruling had
helped stabilize the rupiah.

"The rupiah is now less volatile," she said, pointing out that
despite the continuing domestic political uncertainty the rupiah
was still hovering at around Rp 9,400 to the U.S. dollar.

She said that in the past the rupiah was more sensitive to
large demonstrations.

The rupiah fell to Rp 9,525 to the dollar late on Thursday
from Rp 9,450 on Wednesday amid massive student demonstrations
and a House plenary session over two financial scandals allegedly
involving President Abdurrahman Wahid. (rei)