Banks Face Heavy Challenge in 2007
Monday, 04 December, 2006 | 15:23 WIB

TEMPO Interactive, Jakarta: The banking industry still faces heavy challenges next year, especially state-owned banks, regarding non-performing loans.

Senior economist at PT Bank Negara Indonesia Ryan Kirnanto said that one of the great challenges that the banking industry will face, especially state-owned banks, is the decrease of the non-performing loan rate in PT Bank Mandiri and BNI. This is because the national bank non-performing loans reach 8.5 percent.

“Credit expansion and the improvement of efficiency to edify operational revenues or the capital adequacy rate in state-owned enterprises will also be a heavy challenge next year,” said Ryan.

The non-conducive political situation and legal uncertainty in Indonesia, according to him, will also be a test for the banking industry in improving credit disbursement next year. “The unclear law and the political climate which is getting hotter have made bankers and the business world afraid,” he said.

The growth of the bank's credit until the third quarter of this year is still low. During January and September 2006, credit disbursement was only Rp50 trillion, far lower than the same period last year of Rp150 trillion.

As a result, Bank Indonesia decreased the target of credit growth to 13 percent from the previous target of 18-20 percent. While next year, the central bank estimates that credit growth increases from 15-18 percent.

According to Ryan, other challenges that the banking industry must face next year are related to the central bank's policy on Indonesia’s Architecture Banking program that has obliged banks to have a minimum capital of Rp80 billion in 2007. “The conditions will be the great challenge for banks,” he said.

Suryani Ika Sari