Jakarta – The Financial Sector Policy Committee (FSPC) has issued a new ruling that will provide a legal basis for creditors to accelerate debt restructuring procedures for their debtors.

The committee said in a statement, copies of which were distributed discreetly among journalists, that creditors are permitted to recalculate interest rates to as low as 18 percent for debts in rupiah, and 10 percent for debts in US dollars.

The ruling, however, still leaves the possibility for creditors to cut interest rates lower than those set levels, provided that they are first approved by the creditors' steering committee.

The new ruling also stipulates that cash settlements of debts equal to or less than Rp 50 billion can be given an interest rate discount of up to 100 percent. Meanwhile debts valued at more than Rp 50 billion can only receive a maximum interest discountof 75 percent. The FSPC said that no interest rate discounts would be given to debtors who were not prepared to settle with cash payments.

The policy will particularly affect debtors under the control of the Indonesian Bank Restructuring Agency (IBRA) and almost all national banks, whose majority of shares are controlled by the government following the recapitalization program.

The FSPC, which includes several senior economic ministers, has the final say on major debt restructuring programs pursued by IBRA as well as banks under the government's control.

IBRA administers approximately Rp 260 trillion worth of bad debts, transferred from either liquidated or recapitalized banks.