Year-end NPL requirement 'hard to meet'

JAKARTA (JP): President of state Bank Negara Indonesia (BNI) Saefuddien Hasan acknowledged on Monday that the current macroeconomic environment would create difficulties for banks in meeting the year-end 5 percent nonperforming loan (NPL) requirement.

"We have to meet the target, but it will be tough because of the current macroeconomic environment," Saefuddien told reporters on the sidelines of a working meeting with House of Representatives Commission IX for the state budget and finance.

Bank Indonesia requires domestic banks to have an NPL level of not more than 5 percent by the end of this year as well as a capital adequacy ratio (CAR) of at least 8 percent or risk closure.

But the current high interest rate environment and weak exchange rate of the rupiah against the U.S. dollar have become serious obstacles for banks to meet the requirements.

The average NPL level of domestic banks as per November last year was still around 23.9 percent compared to more than 32 percent at the end of 1999.

Saefuddien said that BNI's current NPL level was still about 21 percent.

"We may or may not reach the 5 percent NPL target," he said.

Elsewhere, Saefuddien said that the publicly listed bank booked an audited net profit of Rp 257 billion in 2000, and projected net profit to jump to Rp 1.4 trillion in 2001.

He said that BNI's profit came after the bank suffered a Rp 2.2 trillion net loss in 1999.

He added that BNI extended Rp 4.2 trillion in new loans in 2000 with total outstanding loans at Rp 35.4 trillion.

He said that new loans in 2001 were expected to reach Rp 4.3 trillion.

BNI's CAR stood at 14.5 percent in December 2000 compared to 9.05 percent in December 1999.

He said that third party funds totaled Rp 85.64 trillion as of the end of last year.

Meanwhile, president of state Bank Rakyat Indonesia (BRI) Rudjito said on Monday that the bank's corporate loans were projected to decline to 18 percent from 20 percent or equal to Rp 5.3 trillion at the end of last year.

"This will reduce the bank's profit," he told reporters.

He said that corporate loans would further decline to 15 percent in 2002.

The International Monetary Fund earlier demanded that BRI dispose all of its corporate loans by the end of last year, but the bank said it could only reduced them gradually.

There is no new deadline when BRI is supposed to dispose of all its corporate loans.

According to an agreement between the government and the IMF, BRI must focus on micro lending by providing credit to the agriculture sector, and to small and medium-sized companies.

The IMF is providing a multibillion dollar loan to help finance the country's economic reform program.(rei)