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Lenders welcome BI's move to ease monetary policy
Indonesiaâs major lenders have expressed their hope that the central bankâs move to lower its primary reserve requirement ratio (GWM) will give them more room to provide more affordable interest rates to corporate borrowers
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ndonesia's major lenders have expressed their hope that the central bank's move to lower its primary reserve requirement ratio (GWM) will give them more room to provide more affordable interest rates to corporate borrowers.
CIMB Niaga finance and strategy director Wan Razly Abdullah said that with monetary relaxation, the banking system would have additional liquidity, which would enable lenders to reduce their cost of funds.
'We see that the additional liquidity will affect pricing structure as well as loan growth in CIMB Niaga this year,' Razly said in an email on Wednesday. He hoped that with cheaper funds, the banks would be able to lower their lending rates.
Other bankers at private lending institutions, Peter Suwardi, institutional banking director at DBS Indonesia and Taswin Zakaria, president director at Maybank Indonesia, voiced similar opinions that a loosening of liquidity would create more wiggle room for banks to increase their lending.
Bankers at state-owned lenders such as Bank Rakyat Indonesia (BRI) finance director Haru Koesmahargyo, Bank Negara Indonesia (BNI) finance director Rico Rizal Budidarmo and Bank Tabungan Negara (BTN) treasury director Iman Nugroho Soeko shared similar views about the policy's benefit.
'The 0.5 percent cut on primary GWM will provide us some liquidity to be invested in productive assets that offer returns equal to those coming from loans, so that we can increase our net interest income,' Iman said.
Meanwhile, Bank Central Asia (BCA) president director Jahja Setiaatmadja said the lender had a 'very liquid' level of liquidity as its loan-to-funding ratio currently stood at 78 percent, lower than most banks.
'However, loan demand has been weakening due to sales decline in most companies, so that the real sector's working capital and investment needs have yet to emerge,' Jahja said.
According to Jahja, monetary relaxation should be supported by government efforts to expedite its spending so as to trigger economic activities, create more jobs and raise purchasing power, which would in turn improve sales and increase loan demand.
Echoing Jahja, OCBC NISP president director Parwati Surjaudaja said the government and BI should copperate to improve the economy as a whole.
The central bank on Tuesday maintained its key rate at 7.5 percent, but lowered the reserve requirement ratio (GWM) to 7.5 percent from 8 percent, effective from Dec. 1.
BI said that a cut in the primary GWM would inject additional liquidity of around Rp 18 trillion (US$1.31 billion) into the banking system, which banks could use to boost their lending activities and also replace expensive funds that banks generate from time deposits.
Loan growth stood at 11.1 percent year-on-year (yoy) as of September, higher than the 10.9 percent yoy and 9.4 percent yoy in August and July, respectively, according to BI's latest assessment.
BCA economist David Sumual said that a cut of primary reserve requirements would help narrow the gap between bank loan commitment and disbursement, which had been significantly widening, indicating companies were yet to use their already-approved credit applications.
Despite low credit usage, David said lenders would seek potential outlets to disburse the additional liquidity of Rp 18 trillion as yields from loans were higher than an almost-zero percent remuneration taken by banks from their placement in the primary GWM.
'Depending on each bank's profile, large conservative banks can either place the extra liquidity in government bonds or lend it to other lenders with a higher-risk appetite, such as regional development banks [BPDs] and second or third-tier banks,' David said.
