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Jakarta Post

Banks ask OJK to extend debt relief program amid mounting COVID-19 cases

  • Riska Rahman

    The Jakarta Post

Jakarta   /   Thu, July 16, 2020   /   05:19 pm
Banks ask OJK to extend debt relief program amid mounting COVID-19 cases A state-owned lender Bank Rakyat Indonesia (BRI) customer walks out of an automated teller machine center in Kediri, East Java, in this undated file photo. (Antara/ Prasetia Fauzani)

Banks have urged the Financial Services Authority (OJK) to extend its debt relief program as the COVID-19 pandemic has yet to show signs of slowing down.

Association of State-Owned Banks (Himbara) chairman Sunarso said on Monday the banks had asked the authority to extend its loan restructuring relaxation program by at least another year.

“The policy has been really helpful for the banking industry and the real sectors,” he said during a live-streamed press conference following a meeting between the OJK and 15 of the country’s biggest banks.  

The policy, stipulated under OJK Regulation No. 11/2020 issued in March, relaxes debt quality assessment and restructuring requirements for debtors that are hit hard by the COVID-19 outbreak.

Indonesian banks now only assess the quality of a loan worth up to Rp 10 billion (US$683,275) based on a debtor’s timeliness in paying the loan’s principal and interest without needing to assess the debtor’s business prospects and financial condition.

Banks are also allowed to declare restructured loans as good loans despite their declining quality due to the pandemic, not categorize them as non-performing loans (NPL) and not set aside provisions for them.

These relaxations are applicable for one year until March 2021 and are prioritized for micro, small and medium enterprises (MSMEs) and recipients of the government’s microcredit program (KUR), according to the regulation.

The bankers’ proposal to extend the debt relief program came following signs of a slow economic recovery. Despite recent relaxations of social restrictions, businesses and consumers are still reluctant to fully go back to business as the country has seen a jump in infections.

Indonesia has recorded at least 80,000 COVID-19 cases of Wednesday afternoon, with over 39,000 deaths, official data shows.

The government now projects the economy to shrink by more than 3 percent in the second quarter and by a further 1 percent in the third quarter, which means the country will enter a recession. The gross domestic product (GDP) grew by 2.97 percent in the first quarter, the lowest in 19 years.

Responding to the bankers’ request, OJK chairman Wimboh Santoso said the agency would review the possibility of extending the debt relief program.

“We would look at the numbers [of the restructured loans] and the sectors [that received the relief], and we hope that we can have [the data] by the third quarter.”

Indonesian banks have restructured a total of Rp 769.55 trillion in loans as of July 6, according to OJK data. Some Rp 326.38 trillion worth were MSME loans from 6.72 debtors and the remaining Rp 443.17 trillion were non-MSME loans from 1.31 million debtors.  

Meanwhile, multifinance firms have restructured Rp 141.45 trillion in financing from 3.89 million contracts in 183 firms as of July 7.

The extension is expected to boost the banking and financial sector’s confidence so they can have more room to disburse more loans to help support the country’s economic growth, said Wimboh.

Indonesia recorded a 3.04 percent loan growth in May, slower than 5.73 percent recorded in April.

Other than asking for an extension for the loan restructuring program, Wimboh said banks also hoped that the government would expedite its spending and that state-owned firms would continue their projects to spur domestic demand and boost loan demand.

Indonesian Banks Association (Perbanas) chairman Kartika “Tiko” Wirjoatmodjo expressed his optimism that banks could start disbursing new working capital loans to MSMEs and corporations by the fourth quarter of this year.