Indonesia: FinMin calls for private banks to boost lending

  • Finance Minister Sri Mulyani Indrawati has called on commercial banks to ramp up loan disbursement and thereby support government efforts to revive Indonesia’s economy amid the COVID-19 pandemic.
  • Sri Mulyani admitted that the pandemic had disrupted the financial sector, forcing banks to deal with loan restructuring and hold back on loan disbursement.
  • However, banks needed to return to their intermediary function to help the economy
  • She added that a recovery in lending growth was important as banks accounted for the lion’s share of the financial sector. According to data from Bank Indonesia (BI), banks held 77.69% of financial sector assets in Apr 21.
  • The overall bank nonperforming loan (NPL) ratio was at an estimated 3.20% in Jun 21, slightly higher than a year earlier at 3.11%, according to BI.
  • The bad loan ratio was recorded at 4.10% for working capital, 3% for investment and 1.91% for consumer spending.
  • BI Deputy Governor Dody Budi Waluyo said the central bank supported the banking sector with increased liquidity, thus strengthening the supply side, while third-party funds had grown 11.28% annually, further boosting liquidity.
  • The latest growth in third-party funds has brought the loan-to-deposit ratio (LDR) down to 81.33%, below the typical level of above 90%.

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