BI to Draft Loan to Value Regulation

TEMPO.CO, Jakarta - Bank Indonesia has planned to draft a regulation on loan to value (LTV) for the property and automotive sector to prevent bad credits and maintain a healthy financial industry.

"In general, the regulation on LTV will be discussed. So, there will be no more motorcycle credit without a down payment since it creates risk profiles," Bank Indonesia Governor Agus Martowardojo said on Thursday, May 7, 2015, during the Institute of International Finance (IIF) Asia Summit in Jakarta.

In terms of property credit, Agus added, BI will ban banks from disbursing loans before the building is completed. In addition, BI will prioritize loans to purchase first house.

Bank Mandiri Executive Director Destry Damayanti hoped that Bank Indonesia would loosen its policy to compensate for the economic slowdown in the first quarter of this year.

"The LTV policy would do, for example, by reducing the down payment for properties or automotive from 30 percent to 10-20 percent. It would be very helpful," Destry said.

Destry explained that if the LTV was raised to 90 percent, then the down payment for the loans would be lowered to 10 percent. Destry said that such policy would have positive impacts on the economy. Destry added that BI could also lower the BI Rate by 25 base points due to the wide gap between BI Rate and the Fed fund rate.

ANTARANEWS