Indonesia’s poor loans ratio is expected to keep rising until year since the market has yet to fully recover from the negative effect of this pandemic, economists have stated.
Financial Services Authority (OJK) statistics demonstrate that the nonperforming loan (NPL) ratio, the ratio of poor loans to overall trades, rose to 3.1 percent in June, greater than 3.01 percent listed in May. Meanwhile, the nonperforming funding (NPF) ratio for funding companies increased to 5.12 percent in June from 4.41 percent regardless of the loan repayment comfort imposed by the jurisdiction.
Bank Permata economist Josua Pardede supposed that some micro, small and medium enterprises (MSMEs) and debtors had to use this OJK’s loan payment comfort policy, which caused a climbing poor loans ratio in financing and banking companies.
“Sluggish loan demand also plays a part in increasing the NPL and NPF ratios for both the banking and multifinance industries,” he advised The Jakarta Post on the telephone on Tuesday.
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loan disbursement just grew 1.49 percentage in June, well below the figure recorded in June 2019 of 9.92 percentage. Albeit still slow, OJK statistics demonstrate that loan expansion began to pick up in July since it climbed to 2.7 percent.
The COVID-19 pandemic pushed economic action to a stop as the authorities executed large scale societal constraints (PSBB) in early April in an attempt to curtail the coronavirus spread, forcing stores, factories and offices to close their doors and hitting loan demand. The government today is gradually reopening the market despite increasing COVID-19 cases.
Josua expressed concern that loan need wouldn’t quickly rebound since the market had yet to completely recover.
“Demand for goods and services is still very much subdued because consumers have not fully regained their confidence due to the rising number of new cases,” he explained.
Household consumption, which led to over half of the country’s gross domestic product (GDP), contracted .51 percentage in the next quarter, Statistics Indonesia (BPS) announced on Wednesday, since the entire market shrunk 5.32 percentage in the interval. Indonesia’s GDP still grew two.97 percentage in the first quarter.
After loan require increased, Josua anticipated the terrible credit ratio could increase and banking NPL would remain around 3 to 3.5 percent at the end of the year.
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Likewise, Bank Central Asia (BCA) economist David Sumual projected that the NPL ratio to hover about 3 to 4% from the end of 2020.
“Banks with portfolios in sectors such as mining, trade, manufacturing, tourism and retail will be those with the highest NPL as those sectors are the most affected by the pandemic,” he explained.
OJK statistics reveal that mining industry NPL recorded the maximum growth to 4.96 percentage in June, followed by the commerce industry to 4.59 per cent and the production industry to 4.57 percentage.
“The bad loan ratio continues to rise slightly from time to time, but this is purely contributed by debtors that did not restructure their debts,” OJK chairman Wimboh Santoso said through a digital media briefing on Tuesday.
The authority issued a new law in March to unwind debt quality evaluation and restructuring demands for debtors who are hit hard by the COVID-19 pandemic so as to alleviate the load on the actual industry and restrain the banks and non-banking businesses’ poor loans ratio.
Read also: Banks request OJK to expand debt relief program amid mounting COVID-19 instances
Wimboh stated banks had restructured Rp 784.36 trillion (US$53.87 billion) of loans in the 6.73 million debtors, whilst multifinance companies had restructured Rp 151.01 trillion in 4.09 million contracts.
He said the authority has been mulling over the prospect of expanding the loan payment comfort for banks and multifinance companies by the following year to provide more room for companies to recover from the effect of the coronavirus outbreak.
“We expect to issue the extension before the end of the year so that everyone, including the banking and non-banking industries, can recover from the pandemic,” he explained.