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Slow credit restructuring in mining exacerbating bad loans
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People walking pass the Financial Service Authority's (OJK) booth in an expo in Jakarta. (Kontan/Daniel Prabowo)
N
on-performing loans (NPL) in the banking industry worsened in August to 3.22 percent compared to 3.18 percent in July, as a result of slow credit restructuring in the mining sector.
"It is carrying over from last year, mainly from the mining sector. Many banks have yet been able to restructure bad loans in the sector," said Financial Service Authority (OJK) chairman Muliaman D. Hadad after a seminar held by the National Banks Association (Perbanas) in Jakarta on Thursday.
Despite the increase, he further said, the banking industry’s NPL actually stood at a tolerable level, below 5 percent. The country’s banks maintained strong capital with a 23.26 percent capital adequacy ratio (CAR), above the minimum requirement of 20 percent.
Economist Aviliani said most of the bad loans came from the commodity boom period, as mining companies were actually refraining from taking on new loans in the last few years.
"In 2008, mining companies took excessive loans for expansion, but then the commodity market dropped and [now they have] run out of cash to pay back the loans," she said. (ags)
