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Bank loans grow just 2 percent in H1
Bank lending experienced relatively sluggish growth during the first semester as lenders — faced with a potential increase in non-performing loans (NPLs) — stayed cautious when channelling new credit while demand from business remained fairly slow
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ank lending experienced relatively sluggish growth during the first semester as lenders — faced with a potential increase in non-performing loans (NPLs) — stayed cautious when channelling new credit while demand from business remained fairly slow.
The latest data from the central bank revealed lending expanded by just 2.09 percent from Rp 1,307.69 trillion in December last year to Rp 1,335.04 trillion in June. A year-on-year comparison however showed lending in June grew by 16.26 percent from Rp 1,148.36 trillion a year earlier.
This minimal growth has forced the central bank to change its forecast for lending growth this year from about 15 percent — based on the banks’ business plan — to about 12 percent, Bank Indonesia (BI) deputy governor Budi Mulya said recently.
Of the Rp 1,335.04 trillion lent by banks in the first semester, Rp 1,119.76 trillion was in rupiah-denomination and the Rp 215.28 trillion in foreign currencies.
Between last December and June, consumer loans experienced the greatest increase of 6.74 percent from Rp 367.12 trillion to Rp 391.85 trillion, while investment loans grew by 5.11 percent from Rp 255.9 trillion to Rp 268.98 trillion.
But working capital loans slid 1.53 percent from Rp 684.67 trillion in December 2008 to Rp 674.21 trillion in June, indicating that businesses were reluctant to expand while waiting for the economy to fully recover from the global financial crisis.
Banks were also being selective in channelling loans for fear the rate of NPLs might increase, as demanded by BI.
As of June, gross NPLs stood at 3.94 percent, still below BI’s maximum tolerance level of 5 percent. That figure was up from 3.2 percent in December last year.
“Many banks are still suffering from tight liquidity. Therefore they impose high deposit rates to freeze that liquidity,” said economist Aviliani, also a commissioner at state-run Bank Rakyat Indonesia (BRI).
She said banks were competing with the government, which issued a large amount of bonds, to attract liquidity in the market, causing funds overall to be more expensive.
One of the reasons why businesses were reluctant to borrow money was due to lending rates, which have remained high, Erwin Aksa, chairman of the Indonesian Young Entrepreneurs Association (Hipmi), said recently. BI senior deputy governor Darmin Nasution said the high lending rates were caused by large depositors who demand high deposit rates to banks, despite the central bank continuing to cut its benchmark interest rate to 6.5 percent this month.
One percent of depositors — most of whom are state-owned companies — now hold about 50 percent of banks’ third-party funds, which means they have the power to push banks to offer high deposit rates, he said.
Third-party funds rose 4.02 percent from Rp 1,753.29 trillion in December last year to Rp 1,823.81 trillion in June. It recorded a 17.35 percent growth from Rp 1,554.16 trillion booked in June 2008.
Aviliani said the government should urge the House of Representatives to pass the bill on the financial system safety net (JPSK), which would allow the central bank to provide funds for banks in short supply of liquidity.
