Year-end NPL requirement 'hard to meet'

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)