Banks, Beware of Bad Loans: Analyst

TEMPO.CO, Jakarta – Analyst warns the Indonesian banking industry to remain cautious in extending credits until early next year. In addition to anticipating global economic recovery, banks must respond to the decelerating performances of a number of business sectors in the country.

"When there is a slowdown in economic performances, non performing loans will arise become more visible," BCA chief economist David Sumual told Tempo yesterday.

According to David, increasing risk of non-performing loans (NPLs) in a number of sectors was to predicted earlier. He cited bad loans in the mining sector which rose following the ban on raw mineral exports. "It was anticipated, banks are more prudent," he said.

Banks are also advised to be more careful in adding reserves as opposed to reducing loan disbursement. The reason, David said, is because each sector still has promising companies. Furthermore, bad debts are still under control.

David's statement is a response to Bank Indonesia's (BI) observation over NPLs in the construction sector until July. The sector posted the highest NPL ratio with 4.43 percent, up from the previous month's 4.24 per cent.

BI deputy governor Halim Alam said the second highest NPL ratio came from the mining sector with 3.09 percent, up from the previous month's 2.49 percent.

Halim said that the growth of credit disbursement to the private sector had slowed to 15.39 percent, year-on-year (YOY). In the previous month, the YOY growth was 17.2 percent. "This is in line with the economic slowdown," Halim said last weekend. 

AYU PRIMA SANDI | AISHA SHAIDRA | GANGSAR PARIKESIT