Bank Indonesia Says Lending Growth May Slow

By webadmin on 03:40 pm Jul 14, 2012
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ID/Grace Dwitiya Amiyanti

Bank Indonesia has said a slowdown in exports and a new finance regulation will weigh down lending growth for the second half of the year.

Deputy governor of Bank Indonesia Halim Alamsyah said on Friday that the number of loans by the country’s commercial banks is expected to decrease in the second half of the year, as lending rules introduced in June would curb demand.

From June 15, financial regulators have enforced a minimum down payment of 30 percent for home purchases. People buying cars will be required to provide a 25 percent down payment if funded by a finance company and 30 percent if funded by a bank.

Previous down payments were as low as 10 percent. Regulators imposed the new rules to try to curb excessive lending.

Economic growth relies on private consumption, which accounts for about two-thirds of the country’s more than $800 billion economy.

“The regulation will definitely have a negative impact on consumption lending, but on the other hand, it will improve the quality of the credit,” Halim said.

Another factor that impacted lending growth was a decrease in exports, according to Halim. “However, export loans were relatively few, only around Rp 350 trillion [in total] as of March, while total lending already amounted to Rp 2.3 trillion in the same period,” he added.

In the future, the central bank will try to maintain the regulation to ensure few non-performing loans are issued.

He said lending was on the rise. Credit for investments reportedly saw the highest increases.

“Normally, an increase in lending will be followed [by non-performing loans], therefore we should remain cautious and not relax our standards,” Halim added.