Bank Indonesia (BI) reported the national banking loan growth only 0.12 in September compared to August, which was still grew 1.04 percent due to the pandemic - Photo by DBS Office

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) reported the national banking loan growth almost stagnant at 0.12 percent in September compared to August, which was still grew 1.04 percent due to the pandemic. But the third party funds rose from 11.64 percent in August to 12.88 percent in September helped by government’ investment.

According to BI’ governor, Perry Warjiyo, even the credit growth slowed, the resilience of the financial system remains strong. In August, the capital adequacy ratio (CAR) remained high at 23.39 percent, the ratio of non-performing loans 3.22 percent (gross) and 1.14 percent (net).

In July, the Financial Services Authority (FSA) has revised down the loan growth to only 4 percent in this year, far from the initial estimate of 11 percent from 2019. 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, the distribution of credit was hampered by the COVID-19 pandemic and reflected in bank credit growth. In May, the loans 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 Bank Indonesia pointed out the declining of new loan growth in the 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 in annual basis, lower than credit realization in 2019 at 6.1 percent as well as the 5.5 percent prediction in the previous survey.

Written by Editorial Staff, Email: theinsiderstories@gmail.com