JAKARTA, Sept 20 (Reuters) - Indonesia’s central bank on Friday unveiled details of its recently relaxed lending rules and said it was confident commercial banks would remain prudent in credit management, an official said.
Bank Indonesia (BI) on Thursday complemented its recent rate cut with a series of rule changes intended to counter weakening credit growth and support Southeast Asia’s largest economy.
The changes included a broadening of BI’s macroprudential intermediation ratio (MIR), which regulates banks’ loan-to-deposit ratio, that would give banks greater room to extend credit.
Under the changes, loans taken out by a bank of at least one-year maturity, excluding interbank loans, will be regarded as deposits. The widened criteria for deposits will help some banks expand credit and keep their LDRs to within BI’s target range, Juda Agung, executive director of macroprudential policy at BI, told reporters.
“This relaxation is taken with prudential principles in mind,” Agung said, underlining that the rules will be different for banks that have non-performing loan ratio above 5% or a capital adequacy ratio below 14%.
Banks will still be guided to manage their MIR within the 84% to 94% range of ratio, with any bank with MIR level below or above the range required to park bigger reserves at BI.
Agung said 42 banks currently manage a MIR level above 94%.
When the new regulation takes effect on Dec. 2, six banks will see their MIR level decline to within BI’s preferred range and an estimated 128 trillion rupiah of additional funds will be available for new loans, he said.
BI will also allow smaller downpayments for property mortgages and vehicle loans starting Dec. 2, Agung said.
Applications for second mortgages and beyond currently need a minimum of 10%-40% downpayment. This range will be lowered to 5%-35% with an additional 5 percentage point reduction given on mortgages for green properties, Agung said.
Currently, downpayments for first-time mortgages are not requires.
For auto and motorcycle loans, the current required downpayment ranges between 20%-30%. Agung said this will be brought down to 10%-25% with a 5 percentage point reduction allowed for eco-friendly vehicles, such as electric cars.
BI officials expect loan growth to accelerate to 11%-13% next year from 10%-12% this year. Year-on-year loan growth was 9.6% as of July, representing a steady weakening since October 2018.
BI has eased lending rules several times this year, including higher MIR ratio guidance and cutting reserve requirements. (Reporting by Maikel Jefriando; Writing by Gayatri Suroyo; Editing by Sam Holmes)