State banks told to recover $5.6b in bad loans
State banks told to recover $5.6b in bad loans
JAKARTA (JP): The government has ordered state banks to
recover Rp 45 trillion (US$5.6 billion) of their problem loans
this year by focusing on their 125 largest debtors.
State Minister of the Empowerment of State Enterprises Tanri
Abeng said on Friday that under the new loan workout strategy,
total problem loans (all categories) at four state banks should
fall from Rp 98.9 trillion as of the end of March to Rp 53.9
trillion by year-end.
"To achieve this target, we plan to complete the restructuring
of problem loans of the 125 largest groups of debtors, which have
total obligations (to state banks) of Rp 24.3 trillion," Tanri
said after an economic and financial resilience council meeting
at the State Guest House.
However, nonperforming loans (NPLs) or bad loans under the
management of the four state banks -- Bank Negara Indonesia, Bank
Mandiri, Bank Tabungan Negara and Bank Rakyat Indonesia -- would
not change from Rp 5.5 trillion by year-end.
NPLs at Bank Mandiri -- a merger of Bank Bumi Daya, Bank
Dagang Negara, Bank Ekspor Impor Indonesia and Bank Pembangunan
Indonesia -- are even projected to increase from Rp 2 trillion at
the end of March to Rp 3 trillion by the end of this year.
These state banks in March transferred most of their NPLs of
over Rp 100 trillion to the Indonesian Bank Restructuring Agency.
The government, however, decided earlier this month to return
the management of some NPLs, namely individual loans of less than
Rp 25 billion, to the state banks in a bid to maximize debt
recovery.
With such a loan workout strategy, the government expects the
four state banks' substandard loans to fall from Rp 25.1 trillion
at the end of March to Rp 18.3 trillion by year-end, doubtful
loans should drop from 46.6 trillion to Rp 10.4 trillion and
special-mention loans from 21.7 trillion to Rp 19.7 trillion.
Current loans should improve from Rp 38.7 trillion to Rp 76.5
trillion by year-end.
To maximize loan recovery, state banks will be required to
form special loan recovery units, supported by improved systems,
clear loan restructuring plans and qualified human resources.
In addition to loan recovery, Tanri said, the restructuring of
state banks also covers efforts to improve the banks' risk
management, business strategy, operating efficiency through cost
restructuring, organizational efficiency and accounting
management systems.
Only after the banks meet all the targets on restructuring
measures, will the government start recapitalizing them.
The government expects to complete the recapitalization of
Bank Negara Indonesia, Bank Rakyat Indonesia and Bank Tabungan
Negara by September and Bank Mandiri by year-end.
Tanri said state banks were expected to return the
government's recapitalization funds in stages, starting in 2000.
(prb/rid)