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BRI haunted by bad debt
The bank’s shares have fallen by more than 27 percent this year.
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A customer makes a transaction at a Bank Rakyat Indonesia (BRI) ATM in Jakarta. (tempo.co/Eko Siswono Toyudho )
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tate-owned Bank Rakyat Indonesia (BRI) expects only about 85 percent of its restructured loans to be repaid according to their terms once the COVID-19 pandemic has subsided.
The country’s largest bank by asset value has predicted that the recipients of about 7 to 15 percent of its restructured loans will struggle to repay their obligations as a result of the pandemic’s widespread effect on cash flow and revenue. The situation could lead to a decrease in the bank’s loan quality.
As of August, the bank had restructured Rp 189 trillion (US$12.69 trillion) in loans to 2.9 million borrowers through deferred principal repayment or interest rate discounts, finance director Haru Koesmahargyo said on Tuesday.
“We also expect that about 1 percent of our restructured loans will turn into non-performing loans [NPL] given the current situation,” he said during a webinar held by brokerage firm Samuel Sekuritas.
The Financial Services Authority (OJK) issued a regulation in March that relaxed debt quality assessment and restructuring requirements for borrowers hit hard by the pandemic. The regulation sought to ease the burden on the real sector and control the bad loan ratio in the banking and non-banking industries.
The pandemic has forced people to limit public activities to avoid catching or spreading COVID-19, resulting in a cooling economy and weakened demand.
Jakarta, the single largest contributor to Indonesia’s economy, reinstated large-scale social restrictions (PSBB) for two weeks on Monday because of a rapid rise in the city’s confirmed cases, which has led a scarcity of available COVID-19 hospital beds.
