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ustomers seeking automotive and mortgage financing from banks and multifinances are now required to pay a minimum down payment of at least 20 to 30 percent of the value of the house, motorcycle or car they buy.

The regulation, which customers might find burdensome, was announced by banking regulator Bank Indonesia (BI) and nonbank watchdog Bapepam-LK on Friday, and is hoped to avoid overheating in sectors that have seen rapid growth in recent years as Indonesia’s rising per capita income resulted in a middle-class boom.

Bankers contacted by The Jakarta Post, most of whom already enforced down payment regulations similar to those required by the new regulation, welcomed the new rule, saying it would help enforce
prudential measures. Multifinances, however, were the ones that would be most hurt by the new rules, according to the business association.

“Two-wheeler [financing] will drop 30 to 50 percent, while four-wheeler [financing] will decline 30 percent due to this regulation,” Wiwie Kurnia, chairman of the Indonesian Association of Financial Services (APPI), told the Post.

Multifinances like PT Adira Dinamika Multi Finance (ADMF) and PT Wahana Otomitra Multiartha (WOMF) will be required to impose a minimum down payment of 20 percent for two-wheeler and four-wheeler vehicles for productive use and 25 percent for four-wheeler used for nonproductive purposes, according to the Finance Ministry, which oversees Bapepam-LK.

The finance minister regulation (PMK) does not cover housing loans.

Buyers previously could buy motorcycles through multifinances without any down payment at all. This helped the nonbank financing industry double within three years to Rp 164.79 trillion in December 2011.

On the banking front, Bank Mandiri chief financial officer Pahala Mansury said the regulation would mostly affect the lender’s motorcycle loans. “For cars and houses, we expect less of an impact.” The nation’s largest bank by assets saw a 80.98 percent surge in automotive loans last year to Rp 5.12 trillion.

Including Bank Mandiri, there are 85 banks providing automotive loans in the country, and they booked a 62.2 percent surge in motorcycle loans and 4.7 percent growth in lending for cars.

“The smaller the down payment, the higher the NPL [nonperforming loans] is,” the central bank said in a presentation material distributed to journalists.

Banks’ NPL for automotive loans stood at 2.8 percent as of July 2011, while multifinances’ overall bad financing stood at 1.56 percent as per December last year.

“I agree with the down payment regulation, so that banks can be more protected against risks. We want to grow prudently,” said Jahja Setiaatmadja, president director of Bank Central Asia (BCA), which has the lowest mortgage loan rate in the country and saw a 31 percent housing loan growth last year.

BI Governor Darmin Nasution said the regulation would put the brakes on automotive and housing loans, which have been accelerating faster than the overall loan growth in recent years.

“While we support faster loan growth, consumptive lending [needs to be] slower,” he told reporters.

As of December 2011, average banks’ housing and automotive loans grew more than 32 percent, higher than the overall 24.9 percent loan growth.

The central bank allows a three-month transition period for banks to adjust, while the Finance Ministry’s ruling for multifinance firms went into effect on March 15.