Jakarta. Bank Indonesia, the country's central bank, is preparing new rules to ensure banks are able to manage liquidity better to boost loan growth to 10-12 percent next year.
Loan growth in 2017 is on course to fall to eight percent year-on-year as lenders get more cautious to approve credit to individual customers and businesses to avoid bad loans.
Bank Indonesia governor Agus Martowardojo said on Tuesday (29/11) authorities will start using loan to value ratio rules — that limit how much a lender could lend money on the back of customer assets — to try to rectify the problem.
"We will start implementing the LTV regulation in a targeted manner," Agus said. The central bank had said previously they might ease LTV for mortgages or car loans in some areas of the country, but keep it unchanged in other regions.
Loan growth has been anemic this year with local lenders only being able to boost it to 8.18 percent by the end of October from the same month a year ago.
In comparison, companies had been enthusiastically going to the capital market this year to issue stocks, bonds, and debt papers, raising a total of Rp 256 trillion in the first ten months of this year, up 44 percent from a year ago.
To encourage banks to give loans to the private sector, Bank Indonesia will also implement a "macroprudential intermediation ratio." The new measure will assess corporate debt purchase in evaluating bank loan disbursement.
The central bank will also try to further ease its reserve requirement rules by adjusting the ratio and extending the time banks need to keep their total rupiah deposits with the central bank, Agus said.
Currently a conventional lender needs to keep a minimum of five percent of its rupiah deposits at Bank Indonesia every day. The lender also needs to ensure the deposits must make up on average 6.5 percent of its total deposits every two weeks.
The rules had already been relaxed earlier this year. Before that, banks also had to maintain a 6.5 percent daily reserve.