Businesses expect bank lending to speed up in 2010 to support infrastructure, on the back of a plan by the central bank to change the requirement for banks’ minimum reserve ratio, a grouping says.
Bank Indonesia said last week the minimum reserve would be linked to banks’ loan-to-deposit ratios.
Banks that lend more will have a lower reserve ratio, said Acting BI Governor Darmin Nasution.
The details of the new ruling are expected to be announced at the Bankers’ Dinner on Jan. 15.
The plan is expected to help push lending — crucial in bracing for the influx of Chinese-made products after the ASEAN-China free trade agreement took effect Jan. 1, with some import duties phased out entirely — as banks will channel more loans than place in reserve, the Indonesian Young Entrepreneurs Association (Hipmi) said in a statement last weekend.
“This new reserve ratio plan is supposed to accelerate lending [for infrastructure], because with lagging infrastructure it will be impossible for businesses to defend against Chinese-made products,” said Hipmi chairman Erwin Aksa.
BI believes lending will grow by between 17 and 20 percent this year as confidence in the economy picks up. The economy is estimated to have grown 4.3 percent last year, and is targeted to accelerate by 5.5 percent this year.
Lending in 2009 grew by only 10.6 percent, or about Rp 138 trillion (US$15.04 billion), from Rp 1,353.6 trillion in outstanding loans in December 2008, BI said.
High interest rates were among the factors that saw businesses borrow less last year, far lower than the 30 percent lending growth booked the year before. While BI cut its key interest rate by 275 basis points throughout 2009, lending rates were only cut by 85 basis points, in part because most banks had relatively high cost of funds.
Therefore, BI will also try to reduce the cost of funds of banks, which will allow banks to cut depo
sit rates and eventually lending rates, Darmin said.
He added Indonesian banks were not yet efficient as their net interest margins were more than 5 percent last year, while banks in neighboring countries had margins of about 3 percent.
Economist Aviliani said lending would increase this year as businesses would invest more amid the global economic recovery.
“It’s time to invest. Indonesia will have high growth again this year, but still below China and India,” she said.
She added infrastructure development would require between 15 and 20 percent of bank loans. The National Development Planning Board (Bappenas) says the government needs almost Rp 2,000 trillion for infrastructure development between 2010 and 2014.
Erwin said banks should also lend more to micro-, small- and medium-sized businesses, which account for more than 90 percent of businesses operating in Indonesia.
Mandiri Sekuritas chief economist Destry Damayanti said banks would mostly channel loans for the consumer, investment and micro sector.
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