Jakarta. The Financial Services Authority, OJK, has advised banks and financing companies against using debt collectors during the Covid-19 pandemic as the authority relaxed the lenders' bad loan requirement as part of a concerted effort to help local businesses to survive the pandemic-induced economic shocks. 

"We ask [lenders] not to carry out any collection activities involving debt collector. Stop it, at least for now," OJK's chairman Wimboh Santoso said in a video conference on Friday.

The government had projected that the Covid-19 could grind Indonesia's economy to a halt and disrupt many businesses, especially the hospitality and transportation sectors. 

Finance Minister Sri Mulyani Indrawati even said earlier that the government's worst-case scenario includes a 0 percent growth for this year, should the country failed to contain the pandemic, which already infected 450 people in Indonesia and killed 38 people as of Saturday.

Bank Indonesia, the country central bank, has cut its benchmark interest rate on Thursday to 4.5 percent and vowed to ensure liquidity in the financial market to support the economy.

Wimboh said that OJK had provided some leeway for banks and financing companies so that, in turn, they can offer more support for their struggling debtors. 

"We want to avoid these businesses from collapsing, which eventually will cause layoffs," Wimboh said.

Under the latest rule, OJK allows banks and financing companies to asses bad loans by only one component, whether the debtors compliant in paying their debt or not. Earlier, the lenders must also take into consideration of their debtor's business prospects and debtor's financial condition.

Often more businesses, despite still managed to pay their installments on time, fail on the last two screens and put under the bad loan categories.

Bad loan stamp would hurt debtors' standing in their attempt to raise more financing in the future. Also, a higher number of bad loans cost the lenders as they had to set aside more of their capital to cover a higher number of bad loans, curbing their ability to expand loan disbursement to other customers.

Seeking to avoid such a credit crunch, OJK said it relaxed the bd loan rule for both banks and financing companies. 

"We provide leniency by relaxing how we assess non-performing loans, from using three pillars earlier to just one: compliance," Wimboh said.

"We will temporarily ignore business prospect and debtor's financial condition while we calculate it for a year," Wimboh said.

OJK also allowed small and medium enterprises (SMEs) and businesses to receive subsidized bank loans (KUR) to restructure their loans. 

"We also allow loans below Rp 10 billion, including SME and KUR, for restructuring, with postponement to pay interest, principal or interest with principal up to maximum a year," Wimboh said.