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New uncertainty could necessitate more loan restructuring
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Standing tall: Bank-owned skyscrapers are pictured from Gelora Bung Karno Stadium in Senayan, Jakarta, on Aug. 27, 2021. (AFP/Bay Ismoyo)
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nother extension of the bank loan-restructuring program believed to be unlikely, but experts and borrowers say authorities may want to reconsider, arguing that some businesses need more time to fix their finances.
The scheme allows banks to reclassify loans that deteriorated as a result of the economic crisis caused by the COVID 19 pandemic: Loans that would normally be considered “nonperforming” can instead be registered as “loans at risk” (LaR), which helps banks keep their nonperforming loan (NPL) ratios artificially low.
The program has been extended twice, in December 2020 and in September 2021, and is now slated to end in March 2023.
The Financial Services Authority (OJK) said on Aug. 1 that the requirements for ending the stimulus had been met, as the share of loans needing to be restructured in major sectors like trade, manufacturing and construction, among many others, had dropped below 20 percent of all loans, while the economy was continuing to recover.
As the OJK was mulling, Bank Indonesia (BI) had started to normalize its policy by tightening the minimum statutory reserve requirement (GWM), which would remove Rp 300 trillion (US$ 20.3 billion) from the banks’ balances, while the Finance Ministry is set to either phase out several COVID-19-related tax incentives or reduce the scale of the beneficiaries.
“It’s true that now everything is much better than two years ago, but we still haven’t got back to normal yet. Will not extending be a wise decision? Maybe not,” Binus University senior economist Doddy Ariefianto told The Jakarta Post on Friday.
Read also: Govt to phase out COVID-related tax incentives by year-end
