T

he amount of bad loans within the banking industry is estimated to decline in 2015, as a result of economic improvement and wider credit expansion, financial regulators are saying.

Bank Indonesia (BI) deputy governor Halim Alamsyah said on Friday the central bank is predicting that overall bad loans, represented by the non-performing loan (NPL) ratio, would decline by the end of 2015 compared to last year.

This year'€™s NPL ratio is expected to hover below 2 percent, according to Halim, versus November'€™s gross NPL rate of 2.4 percent, which was the highest throughout last year, data from BI'€™s monetary policy review showed.

'€œWe think that economic improvement this year will promote a wider disbursement of loans and that the loan quality itself will improve from what we saw in 2014,'€ he said.

BI estimates that the economy will grow from 5.6 to 5.8 percent in 2015, whereas it set the growth range target from 5.1 to 5.5 percent in 2014.

The outlook for credit growth is more optimistic as well, with growth rates projected to be from 15 to 17 percent, higher then the 13 percent realization expected last year.

Halim, however, acknowledged that it was still possible to see bad loans in the commodity and construction sectors.

'€œWe will still monitor the sectors because commodity prices may continue to worsen this year,'€ he added.

Nelson Tampubolon, commissioner in charge of banking supervision at the Financial Services Authority (OJK), voiced a similar opinion to Halim'€™s, saying that economic improvement might push the NPL down.

'€œWe have also asked banks to control their own NPLs,'€ Nelson said.

The OJK will begin holding meetings with the lenders this week to discuss their banking business plans (RBB), which contain their NPL projections.

In terms of credit growth, the business plans that have been submitted to the OJK reveal that the banking industry'€™s average growth rate stands at 16.46 percent.

Bank Bukopin president director Glen Glenardi said that the mid-sized lender would reduce its lending exposure in mining and other resource-related sectors to slash the amounts of its bad loans.

'€œWe will maintain our NPL to at least stay at 3 percent, around the same level as last year. We will focus our loans on the micro, SME [small and medium enterprises] and retail sectors,'€ Glen said, adding that it eyed the same growth range as set by the regulators.

Meanwhile, Bank Mega president director Kostaman Thayib was certain that the lender'€™s NPL would fall from the 3 percent forecast in 2014, driven by the government'€™s strong conviction that the economy would rebound.

The bank, which is owned by tycoon Chairul Tanjung, currently offers loans in corporate, retail and consumer segments. Trading, restaurant and hotel industries make up the largest portion with more than 15 percent of its total loans.

Another mid-sized lender, Bank Internasional Indonesia (BII), is looking to focus more on large, top tier corporations, including state-owned enterprises, to maintain its asset quality, according to BII president director Taswin Zakaria.

The bank saw its NPL ratio jump to 2.11 percent in 2013 from 1.7 percent in the previous year. It has not published its 2014 full year financial report, but in September 2014, its NPL stood at 2.57 percent.

'€œThe large, top tier corporations are not a new segment, but they have proved themselves to be reliable debtors,'€ he said.