Yunindita Prasidya, Jakarta – State-owned banks have restructured loans worth up to Rp 223.16 trillion (US$15 billion) to over 1.7 million borrowers as part of the loan-relaxation program introduced by the Financial Services Authority (OJK) in March, this year.
State-Owned Lenders Association (Himbara) chairman Sunarso said in a webinar hosted by Bisnis Indonesia on Friday that micro, small and medium enterprises (MSMEs) were the biggest beneficiaries of the restructuring program.
The number of MSME borrowers that were eligible for the loan restructuring amounted to 1.5 million, 91 percent of the total.
The value of the loans restructured in the MSME segment amounted to Rp 137 trillion, around 61 percent of the total restructured loans, as of April 30. Meanwhile, the consumer segment made up around 12 percent of the restructured loans and the wholesale segment accounted for the remaining 27 percent.
"Our focus is to save the MSMEs' credit assets," Sunarso said, adding that on average, the borrowers from the MSMEs segment, especially micro-enterprises, could only survive for around three months amid the COVID-19 pandemic.
Sunarso, who is also Bank Rakyat Indonesia (BRI) president director, noted that as of April 30, BRI had restructured almost half of the total loans restructured by Himbara, or around Rp 101.23 trillion, to over 1.4 million borrowers. The MSMEs segment accounted for 94 percent of BRI's restructured loans.
The OJK issued OJK Regulation No. 11/2020 in March asking banks to relax debt quality assessments and restructuring requirements for loans of up to Rp 10 billion as part of the relief program for borrowers impacted by COVID-19.
The regulation stipulates that the debt or financing could be restructured by lowering interest rates, extending repayment periods, reducing principal and interest arrears, adding debt or financing facilities or converting debt or financing into temporary equity participation, with the scheme chosen to be decided between the banks and their clients.
OJK chairman Wimboh Santoso said on May 11 in an online hearing with Regional Representatives Council (DPD) Commission IV that 7.8 million borrowers with debts amounting to Rp 1.11 quadrillion might apply for the loan-restructuring program.
Despite the high number of loans being restructured, Indonesian banks are in a better position to weather the economic crisis, Sunarso noted.
"From crisis to crisis, the quality of the banking sector's risk management has improved significantly," he said.
He explained that by looking at several indicators that measure the banking sector's financial performance, Indonesia is in a better state to deal with the health crisis. As of March, the nonperforming loans (NPL) ratio stood at 2.77 percent, lower than that of the 2008 financial crisis of 3.2 percent and the 1998 Asian financial crisis of 48.6 percent.
The capital adequacy ratio (CAR), which measures banks' financial strength, stands at 23 percent, higher than 2008's 16.8 percent and 1998's negative 15.7 percent.
OJK commissioner for banking supervision Heru Kristiyana said in the same webinar that those indicators showed that the banking sector was still sound and added that the sector's liquidity was still high as the liquidity coverage ratio (LCR) stood at 212.3 percent in February, well above the mandatory minimum of 100 percent.
"The liquidity is relatively sufficient; however, it will experience pressure along with the decline in payments from borrowers as a result of the restructuring," OJK reports.
Piter Abdullah, Center of Reform on Economics (CORE) Indonesia research director, also agreed that "the current condition is still relatively good".
He explained that the countermeasures taken by the government, Bank Indonesia, the OJK, as well as the Deposit Insurance Corporation (LPS) differentiated the current COVID-19 crisis from previous crises.
"The restructuring increases the endurance of companies and banks," Piter said, noting how the program reduced liquidity pressures in both sectors as the troubles in liquidity in the real sector would make their way into the banking sector.
Aside from loan restructuring, the government will also provide loan interest subsidies for loans taken out by MSMEs, mortgages (KPR) and automotive loans (KKB) as part of the debt-relief program.