Bank lending rose further in May, up Rp 7.74 trillion (US$762.95 million) from April, the latest data from the central bank shows, indicating banks are still channeling loans despite the impacts of the global downturn.
As of May, outstanding loans reached Rp 1,305.38 trillion, up from Rp 1,297.64 trillion in April, Bank Indonesia data reveals. Rupiah-denominated loans stood at Rp 1,091.83 trillion in May, while foreign-currency-denominated loans were at Rp 213.55 trillion.
May’s figures represent 19 percent growth from the same period last year.
“Lending rose in relation to the recent cuts in the BI rate and BI certificates [SBI],” Bank Danamon economist Helmi Arman said Thursday.
He added banks would have a bigger negative carry if they kept putting funds in SBI and government bonds.
The central bank this month cut its rate for the eighth straight month, to 6.75 percent, in a bid to accelerate bank lending, which should spur growth, amid the already sound local macroeconomic conditions.
To date since last November, BI has cut its rate by 275 basis points.
“Increasing lending is also a mirror for the improvement in the real sector,” said Helmi, pointing out several indicators.
Exports in May rose 9.5 percent from April, according to the Central Statistics Agency (BPS). Sales of motorcycles and cars showed an increasing trend monthly, according to PT Toyota Astra Motor, a unit of Indonesia’s biggest auto dealer.
“In the second semester, [lending] will continue normalizing,” he said.
Aviliani, an economist at the Institute for Development of Economics and Finance (Indef), who is also an independent commissioner at state-run lender Bank Rakyat Indonesia (BRI), said recently lending would not rise significantly in the second half of the year, although 15 percent overall growth in bank lending for this year — as expected by BI — was still feasible.
This year’s lending will likely grow far less than the 30 percent growth booked last year, which helped stimulate the economy to grow by 6.1 percent.
BI says the economy could expand close to 4 percent this year.
Constricted liquidity is considered one of the factors causing banks to be selective in channeling loans.
Banks need to maintain liquidity and a strong capital base, while facing a higher threat of increasing non-performing loans (NPLs) due to the economic downturn.
