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Banks taking cautious approach amid fears of rising bad debts
Bank Mandiri finance director Silvano Rumantir said on Wednesday that the company would be more careful in disbursing its loans to sectors that would be directly affected by the outbreak of the novel coronavirus that causes Covid-19.
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Money counts: A teller counts money at a Mandiri Sharia Bank branch office in Menteng, Central Jakarta. (Antara/Audy Alwi)
B
anks are taking a more cautious approach in providing new loans amid fears that the worse-than-expected economic conditions will cause an increase in bad debts.
State-owned lender Bank Tabungan Negara (BTN), for example, is reducing its loans for high-rise commercial buildings this year as a result of a rising non-performing loan (NPL) ratio in the sector.
The bank’s president director, Pahala Mansury, said the cautious step was taken because of the rising trend in NPLs in the commercial building sector, such as apartments. According to him, NPLs in the commercial buildings sector significantly increased to 18 percent of the total loans disbursed in the sector, amounting to Rp 21.66 trillion (US$1.6 billion) caused by sluggish apartment sales
As a result, BTN’s gross NPL ratio skyrocketed from 2.8 percent in 2018 to 4.78 percent last year, nearing the unhealthy 5 percent level.
Read also: BTN profits drop more than 90% in 2019 as bad loans, costs rise
Although the bank had already written off some of its bad loans in 2019, it would further reduce NPLs by reducing loan disbursement for apartment projects.
“For commercial buildings, we will only disburse loans to transit-oriented development [TOD] apartment projects and projects owned by state-owned enterprises [SOEs],” he said. This way, the bank could maintain its credit quality and reduce its NPL ratio to 3 to 3.5 percent this year.
