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Second loan-restructuring extension gives banks breathing room
The Financial Services Authority (OJK) announced on Sept. 2 that the end date of the loan-restructuring program had been pushed back to March 2023, from the previous date of March 2022, which is itself an extension of the first expiry date of March 2021.
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Illustration of a bank (Shutterstock/Anton Violin)
A
n extension to the loan-restructuring program for another year is expected to give banks and borrowers more breathing space, as fresh mobility restrictions (PPKM) dim Indonesia’s business recovery outlook.
The Financial Services Authority (OJK) announced on Sept. 2 that the end date of the program had been pushed back to March 2023, from the previous date of March 2022, which is itself an extension of the first expiry date of March 2021.
The restructuring program, initially introduced in March 2020 under POJK No. 48/2020, eased loan-restructuring requirements and allowed banks to classify COVID-19-deteriorated loans as “good loans” to keep nonperforming loan (NPL) ratios artificially low.
The OJK also instructed banks to build up provisions and be more selective about providing loans, including by only issuing loans to those who could prove their survivability and business prospects.
“The Delta variant has hampered economic recovery and the financial performance of borrowers, whether corporations or small businesses,” said private lender Bank Permata economist Josua Pardede on Sept. 3.
“Therefore, this extension could positively impact performance in the banking sector.”
Read also: Loan restructuring program extended until 2022
