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Jokowi wants credit restructuring scheme revived
The President expressed concern about the burden on local banks and wants the loan program to resume until the end of the year, even as Indonesia was the last country to phase out such pandemic-related special facilities in March.
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All about money: A teller shows her customer rupiah bank notes on Oct. 30, 2023, at Bank BSI in Jakarta. (Antara/Muhammad Adimaja)
P
resident Joko “Jokowi” Widodo plans to resume the loan restructuring program in an effort to reduce the burden on local banks that need to make provisions for rising bad loans, especially in the microcredit (KUR) segment.
“There is a directive from the President that an extension of the COVID-19 loan restructuring program, which was supposed to end in March, until next year will be proposed to the Financial Services Authority (OJK) through the Financial System Stability Committee (KSSK) and the governor of Bank Indonesia,” Coordinating Economic Minister Airlangga Hartarto said at the State Palace on Monday.
Introduced in 2020, the program was aimed at helping businesses affected by the pandemic and struggling to repay loans. Under the scheme, banks were allowed to reclassify deteriorated loans of those businesses, which are typically categorized as nonperforming loans (NPL), as Loan at Risks (LAR). As a result, the NPL ratios of those banks could be kept artificially low.
The program was extended three times before it ended at the end of March.
In October 2020, some 6.68 million debtors with loans worth Rp 830.2 trillion (US$50.63 billion) had taken advantage of the scheme. More than 75 percent of those debtors were micro, small and medium enterprises (MSMEs) with loans totaling Rp 348.8 trillion.
According to OJK data, only Rp 228 trillion of those outstanding loans remained in the program at the end of March.
Read also: OJK expects ‘minimal’ impact on NPL as loan restructuring program ends
