Bankers have welcomed Bank Indonesiaâs (BI) new policies that will allow them to disburse more loans and generate funding from new sources
Bankers have welcomed Bank Indonesia's (BI) new policies that will allow them to disburse more loans and generate funding from new sources.
One of the rules ' which will be issued next month and be implemented later in the year ' will increase the upper limit of the loan-to-deposit ratio (LDR) from the current 92 percent for banks that have complied with an earlier regulation on micro, small and medium enterprises (MSMEs).
According to the regulation, which was published by BI in late 2012, all existing banks, including foreign ones, must have channeled at least 20 percent of their total lending to the MSME segment by 2018.
Implementation would be carried out in stages, with 5 percent targeted for 2015. The target is then raised by 5 percentage points each following year until 2018.
Besides setting a higher limit for LDRs, the upcoming regulation will also allow securities to be regarded as a component of deposits, thus broadening the scope of liquidity.
Banks found themselves in a tight liquidity situation last year as there were inadequate third-party funds that could be channeled as loans.
BI spokesperson Tirta Segara said in a statement that the policy would hopefully spur greater banking activity and help the banking industry achieve an overall 15 percent to 17 percent loan growth target in 2015.
The industry posted only 11.6 percent growth in 2014, the lowest since 2010, as economic growth last year decelerated to the lowest level in five years, to 5 percent. Bank Negara Indonesia (BNI) president director Achmad Baiquni said the new, higher, limit would allow the state lender to better expand its lending coverage.
Its financial report shows that MSME loans already accounted for 16.2 percent, equal to Rp 42.52 trillion (US$3.28 billion), of its outstanding loans by December.
'We will be able to channel more funds as loans, which will eventually generate higher profitability for us. Loans, as you know, are the financial instruments with the highest yield,' he said on Wednesday.
He added, however, that the bank would not necessarily revise its 2015 business plan to accommodate more aggressive expansion, saying that it would stick to its 14 percent to 16 percent target as previously laid out.
Private lenders CIMB Niaga and Permata Bank are also among the banks to embrace the policy news.
As of December 2014, CIMB Niaga's MSME segment made up 12.6 percent of total loans and its LDR reached 95.6 percent.
'Hence BI's plan to increase the LDR for banks that have an MSME segment of 5 percent or more will also affect CIMB Niaga. We appreciate the plan, as it will give banks more room for lending. We will maintain our LDR at a comfortable level,' CIMB Niaga's strategy and finance director Wan Razly Abdullah said in an email.
Meanwhile, Permata president director Roy Arman Arfandy said the extended deposit coverage would encourage the lender ' part of Astra International and Standard Chartered Bank ' to enter the capital market to complement its funding structure.
He confirmed that Permata had a plan to issue bonds, but said it was still assessing in more detail the timing of the issuance and its value.
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