The Financial Services Authority (OJK) has actually revealed that it will extend its loan reorganizing program, issued to cushion the effect of the pandemic on the nation’s debtors and banks, up until March2022
The OJK said it would finalize the policy extension in the kind of an OJK Guideline (POJK) and would extend a number of other programs at the same time, including the exclusion of the loan-at-risk computation when assessing a bank’s health.
” The extension of this restructuring program serves as an anticipatory step to provide support against the declining quality of customers seeking restructuring,” OJK chairman Wimboh Santoso stated in a news release on Thursday.
” Nevertheless, the restructuring extension policy has to be provided selectively, based on the bank’s assessment, to avoid ethical risk so that borrowers still want and are able to perform economic activities while adapting to the pandemic,” he included.
The loan restructuring program was developed in March under POJK No. 11/2020 and was formerly set to last until March2021 The regulation unwinds debt quality evaluations and restructuring requirements for loans worth approximately Rp 10 billion (US$681,082) for customers impacted by COVID-19
The loans can be restructured by decreasing rate of interest, extending repayment durations, minimizing primary or interest arrears, including loan centers, or transforming loans into short-lived equity participation schemes agreed upon by banks and their clients.
Banks are permitted to state the reorganized loans “excellent loans” in spite of their declining quality as a result of the pandemic and need not classify them as non-performing loans (NPL) or set aside loan-loss provisions for them.
Read also: Banks ask OJK to extend debt relief program amid installing COVID-19 cases
In an online hearing with Regional Representatives Council (DPD) Commission IV on May 11, Wimboh pointed out that it was possible that 7.8 million customers would look for the loan restructuring program, totaling up to Rp 1.11 quadrillion in reorganized debt.
According to OJK data, as of Sept. 28, a total of Rp 904.3 trillion in loans to 7.5 million customers had actually been restructured.
State-owned Bank Mandiri business secretary Rully Setiawan told The Jakarta Post on Friday that while the policy had actually affected the bank’s income and revenues, it had prepared a tracking mechanism and an action strategy to guarantee that the credit quality and NPL ratio were at equal levels. With the controlled loan and possession quality, he stated, the bank did not require to add provisions to make up for the impact of the policy on the bank’s income.
As of Oct. 20, Bank Mandiri had accepted restructure Rp 119 trillion in loans to 536,000 borrowers.
” In our viewpoint, the variety of customers that have yet to restructure and may need to do so when POJK No. 11 is extended will not be considerable, with the assumption that the COVID-19 crisis will not be worse than it is right now,” Bank Mandiri handling director and primary risk officer Siddik Badruddin said throughout a public conference on Monday.
The bank, he added, was considering whether to extend the restructuring duration for borrowers who had currently reorganized.
However, he said there was “no usage in additional restructuring” of loans to the highest-risk customers, who were not anticipated to be able to recover from the pandemic. They represented 10 to 11 percent of the reorganized debtors.
“[The extension] is an excellent action, and it requires to be done,” Paul Sutaryono, banking observer and former assistant vice president of Bank Negara Indonesia (BNI), told The Jakarta Post on Friday.
He said a year-long extension was sufficient to support the genuine sector, which had yet to recover, however acknowledged that full recovery by 2022 was not ensured.
” Naturally banks will be pressured because the income from loan interest will diminish substantially. As an outcome, earnings will thin out,” Paul said.
Nevertheless, he added, Indonesian banks would still be appealing to foreign investors in spite of the decrease in success.
From April to August, the Indonesian banking market’s net interest margin (NIM) fell by 0.14 percentage points from 4.57 percent to 4.43 percent, OJK information programs. The margin is an indicator of banks’ success and growth.
The NPL rate was 3.15 percent in September, down from 3.22 percent in August however well above the 2.66 percent scheduled in September2019
Paul noted that although NPL rate stayed below the threshold of 5 percent, it served as a tip to banks to improve the quality of loans.
