JAKARTA (TheInsiderStories) – After the state-owned banks (HIMBARA), now the government places funds totaling Rp11.5 trillion (US$793.10 million) to seven regional development banks (RDB) as part of the National Economic Recovery program. For the initial stage, the ministry of finance will injected Rp5.5 trillion into four RBDs.
In detail, the four banks are PT BPD Jawa Barat dan Banten Rp2.5 trillion, PT BPD DKI Jakarta Rp2 trillion, PT BPD Jawa Tengah Rp 2 trillion, and PT BPD Sulawesi and Gorontalo Rp1 trillion. While, PT BPD East Java Rp 2 trillion, PT BPD Bali Rp 1 trillion and PT BPD Yogyakarta Rp1 trillion are still in the evaluation stage.
Last month, the government placed Rp30 trillion in banks incorporated in HIMBARA. The allocated funds come from government funds placed at Bank Indonesia (BI).
According to the finance minister, Sri Mulyani Indrawati, the placement of state money in the regional bank is proof of the government’ support for the recovery of the real sector in the face of the COVID-19 pandemic and can be channeled to micro, small, and medium enterprises. With this scheme, the acceleration of national economic recovery is expected to be achieved by reaching out to business actors who are BPD customers and spread throughout Indonesia.
Placement of these funds is expected to support the improvement of the regional economy from the supply side, where regional entrepreneurs get cheap loans from RBD, and from the demand side, where local governments have more fiscal capacity to buy local products.
She added, the placement of these funds was carried out based on Law Number 2/2020 concerning State Financial Policy and Financial System Stability for Handling COVID-19 and Minister of Finance Decree Number 70/2020 regarding placement of state money in commercial banks.
Indrawati claimed have written a letter to BI to transfer the state funds at the central bank to the national banking sector to restore the real sector. He added that banks were not permitted to use placement funds to buy state bonds or foreign currencies.
Recently, the Financial Services Authority (FSA) revised down the loan growth to only 4 percent in this year, far from the initial estimation of 11 percent. The revision is based on the development of credit realization in recent months and changes in business plans from the national banks.
According to the chairman, Wimboh Santoso in one seminar on July 22, the distribution of credit was hampered by thepandemic and reflected in the credit growth in May, which only grew 3.04 percent in annual basis or slowed compared to the previous month at around 5.73 percent.
Even though it is slowing down, he is optimistic that bank loans will gradually improve and start to normal again at the beginning of 2021. He notes that the banking risk profile in March 2020 is still maintained at a controlled level with a non performing loan ratio of 2.77 percent and net 0.98 percent.
Santoso was optimistic that banks’ bad loans could still be maintained in the range of under 3 percent inline with the implementation of the debt restructuring. Based on FSA’ data, the condition of the bank’ capital adequacy ratio until May 2020 also remained safe at 22.14 percent.
The latest Banking Survey conducted by BI also pointed out the declining of new loan growth in the second quarter (2Q) of 2020, with the weighted net balance of demand for new loans deteriorating significantly to -33.9 percent compared with 23.7 percent in the previous period and 78.3 percent in the 2Q of 2019. Respondents confirmed the declining growth of all loan types, investment loans in particular.
While, the survey respondents expected new loan growth to rebound in the third quarter of 2019, even though not as high as the same period in the previous year. They predicted looser lending policy in the 3Q of 2020, as indicated by a marked decline in the Lending Standard Index to 3.9 percent from 34.4 percent in the previous period.
The banks expected to ease lending standards on all loan types through credit lines, collateral requirements and loan maturity. The latest survey also indicated slower credit growth in 2020. Respondents predicted credit growth in 2020 at 2.5 percent, lower than credit realization in 2019 at 6.1 percent, as well as the 5.5 percent prediction in the previous survey.
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