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Banks offer relief to help borrowers and themselves
A number of local banks have announced relief programs to help corporate and individual borrowers cope with uncertainties caused by the coronavirus outbreak, which has severely hit business activities in the country
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number of local banks have announced relief programs to help corporate and individual borrowers cope with uncertainties caused by the coronavirus outbreak, which has severely hit business activities in the country.
State-owned lender Bank Mandiri said it would provide relief in the form of deferral of loan payments and a reduction of administrative fees for borrowers with a loan ceiling of up to Rp 10 billion (US$624,221), especially micro, small and medium enterprises (MSMEs).
“We realize that MSMEs are facing a tough time because of COVID-19. That’s why we have tried to come up with a way to ensure debtors in this segment can get through this tough time,” vice president director Hery Gunardy said in the statement issued on March 24.
The bank’s corporate secretary, Rully Setiawan, explained on Friday that, in addition to corporate borrowers, borrowers of automotive loans and app-based motorcycle taxi drivers would be given similar relief.
State-owned Bank Rakyat Indonesia (BRI) said it would provide relief in the form of extended repayment periods, adjusted interest rates, deferred loan repayment as well as reduced penalties.
Companies engaged in the sectors of tourism, transportation, hotel, trade, manufacturing, agriculture and mining would be given priority in applying for the relief, BRI president director Sunarso said in a statement.
The relief would vary for each debtor, as the bank would factor in a business’s prospects and repayment capacity, he added.
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“Banks and nonbanking financing firms are banned from chasing after loan installments, especially using debt collectors.”
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The move followed a new rule issued by the Financial Services Authority (OJK) on March 19 that requires banks to provide relief in the form of loan restructuring to ease the financial difficulties faced by borrowers affected by the coronavirus crisis. The OJK proposed that relief be given to borrowers with a loan ceiling of Rp 10 billion.
In a statement on March 24, President Joko “Jokowi” Widodo had called on banks to defer by one year loan repayments by business owners, app-taxi drivers and fishermen hit by the COVID-19 crisis.
“Banks and nonbanking financing firms are banned from chasing after loan installments, especially using debt collectors. It is prohibited and I’m asking the police to [oversee] the matter,” the President said in a teleconference with the media.
Meanwhile, the OJK announced on Monday that a number of local banks had agreed to provide relief to customers affected by the coronavirus outbreak.
"Banks that have offered relief include Bank Mandiri, BRI, Bank Negara Indonesia, Panin Bank, Bank Permata, Bank BTPN, DBS Bank, Index Bank and Ganesha," OJK spokesperson Sekar Putih Djarot said in a statement.
Most of the banks have provided relief in the form of deferred loan repayment and reduced administrative fees.
Panin Bank and Bank Permata, for example, provide relief in the form of an extended loan repayment period, a delay in the repayment of loan principal and an adjustment in lending rates.
Meanwhile BTPN said the relief would also be given to borrowers engaged in the informal sector, especially MSMEs.
Although the new OJK rule does not stipulate that all banks are obligated to relax loan terms, Bank Permata economist Josua Pardede said banks were likely to comply with the rule.
“The relaxation could significantly help banks to at least maintain their performance until next year and prevent their nonperforming loan [NPL] ratio form rising too fast due to the pandemic,” he said.
With the leniency applied by the banks, Josua projected the banking industry’s NPL ratio to rise only to 3 percent this year from last year’s 2.52 percent.
Despite the expected positive impact of the leniency on banks’ performance, he believes banks will be selective in providing relief as they remain prudent to prevent misuse by irresponsible parties.
For this reason, Indonesia Small and Medium Enterprises Association chairman Ikhsan Ingratubun said he hoped banks would be transparent toward the OJK in their loan assessments.
“We also hope that the OJK can create clear sanctions on multifinance firms that still use debt collectors and go about their business as usual to protect us while we face this ordeal,” said Ikhsan.
