Indonesian central bank will push banks to boost lending on productive sector as part of efforts to increase bank intermediation function, a media reported here Tuesday.
Spokesman of the central bank Difi A. Johansyah quoted by the Jakarta Post as saying that the central bank planned to issue a regulation on banks' loan-to-deposit ratios (LDR), which will give the central bank more regulatory means to "force" banks to increase their lending.
The new regulation would require banks to have an LDR within a specific range set by the central bank, Difi said in Jakarta on Monday. Otherwise, banks will be required to pay higher reserve requirements (GWM).
The central bank Governor Darmin Nasution said recently that the central bank's plan to link banks' LDR with lending positions would be necessary because many banks still preferred to use part of their short-term deposits for non-productive sectors such as government's bonds.
The central bank governor said with the LDR regulation, the central bank hoped banks would be able to perform their intermediary functions, lending money and collecting funds, more effectively.
A healthy LDR for banks ranged between 75 and 105 percent, he said. However, the central bank monetary policy research director Perry Warjiyo recently said the central bank had decided the range to be between 78 and 102 percent. According to central bank data, the average LDR of national banks in the period ending June 30 stood at 75 percent.
Analysts hailed the planned regulation, saying with such a regulatory instrument the banks would have no choice but to increase their lending. And otherwise, if they continued to keep their funds idle, they would have to pay additional costs. The central bank said the new LDR ruling will become fully effective around February next year. At least four major banks are likely to face difficulties meeting the new regulation. Bank Mandiri, Bank Central Asia (BCA), and Bank Negara Indonesia (BNI), with LDRs of 66, 51 and 68 percent, will need longer to adjust to the new ruling. Meanwhile, Bank Tabungan Negara (BTN), with an LDR of 116 percent, will also need time to reduce its LDR.
Spokesman of the central bank Difi A. Johansyah quoted by the Jakarta Post as saying that the central bank planned to issue a regulation on banks' loan-to-deposit ratios (LDR), which will give the central bank more regulatory means to "force" banks to increase their lending.
The new regulation would require banks to have an LDR within a specific range set by the central bank, Difi said in Jakarta on Monday. Otherwise, banks will be required to pay higher reserve requirements (GWM).
The central bank Governor Darmin Nasution said recently that the central bank's plan to link banks' LDR with lending positions would be necessary because many banks still preferred to use part of their short-term deposits for non-productive sectors such as government's bonds.
The central bank governor said with the LDR regulation, the central bank hoped banks would be able to perform their intermediary functions, lending money and collecting funds, more effectively.
A healthy LDR for banks ranged between 75 and 105 percent, he said. However, the central bank monetary policy research director Perry Warjiyo recently said the central bank had decided the range to be between 78 and 102 percent. According to central bank data, the average LDR of national banks in the period ending June 30 stood at 75 percent.
Analysts hailed the planned regulation, saying with such a regulatory instrument the banks would have no choice but to increase their lending. And otherwise, if they continued to keep their funds idle, they would have to pay additional costs. The central bank said the new LDR ruling will become fully effective around February next year. At least four major banks are likely to face difficulties meeting the new regulation. Bank Mandiri, Bank Central Asia (BCA), and Bank Negara Indonesia (BNI), with LDRs of 66, 51 and 68 percent, will need longer to adjust to the new ruling. Meanwhile, Bank Tabungan Negara (BTN), with an LDR of 116 percent, will also need time to reduce its LDR.
