After loans outstanding fell in the first quarter on higher risks amid the global credit crunch, the central bank expects loan disbursements to pick up in subsequent quarters given signs the economic crisis is bottoming out.
Outstanding loans as of the end of March reached Rp 1,325.3 trillion (about US$129.9 billion), actually Rp 11.5 trillion lower than the Rp 1,353.6 trillion booked by the end of December, as more loans were redeemed than extended.
Miranda S. Goeltom, Bank Indonesia (BI) senior deputy governor, is however upbeat bank lending will soon pick up as the economy is improving on strengthening demand.
“BI is confident on credit growth in the next quarters, and optimistic this will be able to support (economic) growth for the rest of the year,” Miranda told a hearing with the House of Representatives Thursday.
BI, the Finance Ministry and state-run banks were summoned by the House’s commission XI overseeing financial affairs to discuss the role the banking sector could play in bolstering the real sector.
Miranda said lending had in fact increased from January to February to March, although “not by much”, as the global downturn continued to have negative impacts but indicated that the downturn had reached the bottom. “But, we do not know how long [it will stay on the] bottom.”
The economy grew by 4.4 percent in the first three-months of 2009 compared to the last quarter.
BI data shows lending slightly rose from Rp 1,325.3 trillion in January to Rp 1,339.1 trillion in February, and then up to Rp 1,342.1 trillion in March.
“Banks did not [hold back from] loan provision for no reasons. They have come to us, presenting the outlook of the debtors, which is questionable (amid the global economic downturn),” she said, commenting on weak lending performance in the January-March period.
In the hearing, lawmakers acknowledged the banking sector’s problems but pointed out also that as the economy has been faring not as badly as first thought, banks should also play their part in boosting loan demand by, for instance, cutting credit interest rates just as aggressively as the central bank.
Lawmaker Ramson Siagian said while BI had cut its benchmark interest rate by 225 basis points so far this year, banks had not been that aggressive [in following suit].
Miranda said lending rates on average had so far this year actually decreased by 38 basis points, while deposit rates fell by 171 basis points.
The average rate for investment loans stands currently at 14 percent, for working capital loans at 14.8 percent and for consumer loans at 16.5 percent, she added.
Bank Indicators as of Q1 2009 (in trillion rupiah)
Jan Feb Mar
Third-party funds 1,745.6 1,771.1 1,786,2
Loans 1,325.3 1,339.1 1,342.1
Non-performing 4.2 4.3 4.5
loans (%)
Source: Bank Indonesia
