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Jakarta Post

Sharia loans likely to get own LTV limit

  • The Jakarta Post

Jakarta   /   Tue, August 28 2012   /  05:30 am

Although sharia banks operating in the country will soon be subject to Bank Indonesia’s (BI) new policy regulating minimum down payments for housing and automotive loans, they may see different limits than those imposed on commercial banks, a deputy governor for the central bank says.

BI announced this month that it would soon include sharia banks in its policy to restrict loans to value (LTV) in automotive and housing lending, which had entered into effect for Indonesian commercial banks in June, in a move to avert economic overheating in the country’s booming consumer credit segment.

For commercial banks, the central bank limited housing and automotive loans to a maximum of 70 percent of their total value, while it set the limit for motorcycle loans at 75 percent. Previously, the LTV for all lending stood at 80 percent.

“We are still studying the limit level ...