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View all search resultsBanking: Messages behind fall of NPL ratio
As of June, risky loans stood at 8.33 percent, or Rp 414.16 trillion.
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The banking sector’s efforts to reduce the NPLs through write-offs must still be carried out. (Shutterstock/File)
I
n the first half semester of this year, Indonesia’s banking performance was marked by an improvement in the ratio of non-performing loans (NPLs). According to the monthly general banking report in June, the NPL ratio stood at 2.67 percent, slightly lower than the 2.96 percent in the first half of 2017.
Even so, if we look at the components that comprise the NPL ratio, the improvement is driven more by an increase in lending rather than a decrease in the NPL amount, which only decreased slightly.
As an illustration by referring to the Bank Indonesia monthly bank data in June, the NPL only decreased slightly by Rp 80 billion (US$5,400), or 0.06 percent year-on-year (yoy), to Rp 133.02 trillion. Simultaneously, lending to third parties increased by Rp 482.74 trillion, or 10.75 percent yoy, to Rp 4.97 quadrillion.
Second, the NPL amount that was written off increased 16.24 percent yoy, or Rp 43.07 trillion, during the June 2017 to June 2018 period, from Rp 265.14 trillion to Rp 308.21 trillion. Logically, the bad loan write-off would reduce the NPL amount.
