Sign up | Log in



Home  >>   Daily News  >>   Indonesia  News  >>   Finance  >>   Bank Indonesia’s loan push may spark defaults
NEWS UPDATES Asean Affairs        2  March 2011

Bank Indonesia’s loan push may spark defaults

Related Stories

February 14, 2011
Indonesia's Islamic bank assets to jump

February 7, 2011
Indonesian banks climb in global rankings

January 25, 2011
Indonesia's Bank Mandiri to raise $1.3 Billion

January 24, 2011
Indo banks should earn less

January 4, 2011
Bank Indonesia may hold key rate as inflation hits 7 percent

November 30, 2010
Bank Indonesia may rein in hot money

A new move by the central bank to spur bank lending and economic growth may cause an increase in bad loans and erode earnings, analysts have warned.

As of Tuesday, Bank Indonesia began penalizing banks with loan-to-deposit ratios below 78 percent. Bank Mandiri, the country’s largest lender by assets, boosted its ratio to 72 percent from 66 percent in June, according to a company spokesman.

Bank Central Asia raised its ratio to 55 percent from 51 percent, corporate secretary Raymon Yonarto said, while state-owned Bank Negara Indonesia has a ratio of 68 percent.

“With the 78 percent floor in place, asset quality is likely to deteriorate, leading to higher nonperforming loans,” said Eugene Leow, an analyst at research provider Business Monitor International in Singapore. “Profit margins will also take a hit as banks may have to lower lending rates to meet the minimum ratio, eroding their net interest margins.”

Rising consumer spending is driving expansion in Indonesia, increasing pressure on policy makers to restrain price gains and protect purchasing power. Last quarter, the economy grew the fastest in six years.

By setting a loan-to-deposit ratio threshold and stipulating the amount banks must hold as reserves, BI can bolster growth while keeping inflation on target, Governor Darmin Nasution said in September, when the new rules were first outlined. About 30 lenders had ratios below the required minimum at the time.

If banks are forced to boost lending, “it is quite easy to think they might relax their standards a little too much,” said Robert Prior-Wandesforde, head of Southeast Asia economics at Credit Suisse.

“I’ve also heard that Bank Indonesia wouldn’t mind higher amounts of leverage in the economy to make its interest rate tool more effective.”

Consumer loans in Indonesia climbed 22.7 percent last year compared to a 19 percent increase in 2009 and a 30 percent advance in 2008. Indonesian companies raised $10.8 billion from syndicated loans last year, little changed from 2009. They agreed to $119 million of loans in January, the slowest start to a year since 2006.

“Indonesia is a very under-banked country and there is clearly scope for loan growth,” said Aninda Mitra, Moody’s lead sovereign analyst for the country. “Any persuasion to increase lending needs to be handled carefully, though, given that inflationary pressures are becoming more evident.”

President Susilo Bambang Yudhoyono hopes to expand the country’s economy at an annual average rate of 6.6 percent and create 10.7 million jobs by the end of his second term in 2014. He has pledged to double infrastructure spending to $140 billion to improve and expand the nation’s roads, ports and power plants.

BI will impose a fine of 0.1 percent of a bank’s deposit base for every 1 percent shortfall in the loan-to-deposit ratio.

Raymon said it was “almost impossible” for BCA to meet the 78 percent target this month, so would pay a penalty of between Rp 6 trillion and Rp 7 trillion ($678 million to $791 million).

Reach Southeast Asia!
10- Nations, 560- Million Consumers
And $1 -Trillion Market
We are the Voice of Southeast Asia Media Kit
The only Media Dedicated to Southeast Asia Advertising Rates for Magazine
  Online Ad Rates

Comment on this Article. Send them to

Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below




1.  Verifier

1. Verifier

For security purposes, we ask that you enter the security code that is shown in the graphic. Please enter the code exactly as it is shown in the graphic.
Your Code
Enter Code

Today's  Stories    2  March 2011 Subsribe Now !
• Lower Indo food prices ease inflation
Subcribe: Asean Affairs Global Magazine
• Bank Indonesia’s loan push may spark defaults Asean Affairs Premium
• Raising light rail financing
• Philippines Pangilinan claims control of MRT 3
Research Reports
on Thailand 2007-2008

•Textiles and Garments Industry

•Coffee industry

•Leather and footwear industry

•Shrimp industry

• Philippine food companies expect inflation
• Thailand plans to sell off AIS concessions
• Arcelor acquires Thailand’s G Steel
• Vietnam faces water crisis
Asean Analysis    2   March 2011 Advertise Your Brand
• Asean’s new “white gold” Sponsor Our Events
Asean Stock Watch    2  March 2011
• ASEAN Markets to Fall
Global News Impacting Asia    17 November 2010
• Bank of America sees Asian inflation
• Lloyd’s increases insurance push in Malaysia
• Wells Fargo analyst on euro
• Obama’s visit to Asia

ASEAN NEWS UPDATES      Updated: 04 January 2011

• Women Shariah scholars see gender gap closing
• Bank Indonesia may hold key rate as inflation hits 7 percent

• Bursa Malaysia to revamp business rules
• Private property prices hit new high in Singapore
• Bangkok moves on mass transport
• Thai retailers are upbeat
• Rice exports likely to decline
• Vietnamese PM projects 10-year socioeconomic plan


This year in Thailand-what next?

04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More

Home | About Us | Contact Us | Special Feature | Features | News | Magazine | Events | TV | Press Release | Advertise With us

| Terms of Use | Site Map | Privacy Policy  | DISCLAIMER |

Version 5.0
Copyright © 2006-2020 TIME INTERNATIONAL MANAGEMENT ENTERPRISES CO., LTD. All rights reserved.
Bangkok, Thailand