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OJK expects ‘minimal’ impact on NPL as loan restructuring program ends
At the end of February, there were still 977,000 debtors with outstanding loans totaling Rp 242.8 trillion (US$15.25 billion) in the restructuring process.
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Bank-owned skyscrapers are seen on Aug. 27, 2021, after office hours amid the COVID-19 pandemic, in Jakarta. (AFP/Bay Ismoyo)
T
he Financial Services Authority (OJK) says the country’s banking sector is ready to deal with the conclusion of the loan restructuring program, which ended on March 31.
At the end of February, there were still 977,000 debtors with loans in the restructuring process, with the outstanding debt totaling Rp 242.8 trillion (US$15.25 billion). At the peak of the program, outstanding loans under restructuring reached Rp 900 trillion from 8 million customers.
Based on stress tests conducted before the end of the restructuring program, the OJK sees no risk of a sharp increase in non-performing loan (NPL) ratios at lenders.
"The potential increase in NPL and loans at risk (LAR) after the stimulus ends will be minimal, as banks have implemented cautious principles in restructuring loans," Dian Ediana Rae, chief executive of banking supervision at the OJK, said in a statement on Tuesday.
In February, the NPL ratio for the entire banking sector in the country was 2.35 percent, below the 2.58 percent recorded during the same month of last year and well below the maximum threshold of 5 percent acceptable to the OJK.
The LAR ratio came in at 11.56 percent in February, down from 14.51 percent a year earlier.
The OJK noted that banks had made adequate provisions for potential losses with industrywide coverage exceeding 336.6 percent of banks’ LARs and 202 percent of their NPLs.
