LPS Chairman Says Banking Resilience Is Maintained During The COVID-19 Pandemic

JAKARTA - Chairman of the Board of Commissioners of the Deposit Insurance Corporation (LPS) Purbaya Yudhi Sadewa said banking resilience is still quite strong amid the COVID-19 pandemic which has not yet recovered.

"This achievement is supported by a fairly high level of capital at the level of 25.8 percent and loose liquidity amidst increasing external pressures stemming from geopolitical tensions between Russia and Ukraine and the acceleration of normalization of monetary policy of world central banks," said Purbaya in her remarks at the LPS Gathering, in Jakarta, Tuesday, April 12.

He detailed, that as of February 2022, total banking assets grew 10.3 percent year on year (yoy) supported by growth in Third Party Funds (DPK) of 11.1 percent yoy.

Meanwhile, banking credit distribution grew by 6.3 percent year on year or much improved compared to throughout 2020 at the beginning of the COVID-19 pandemic with credit distribution contracting minus 2.4 percent yoy.

"DPK growth is higher than credit growth, so banking liquidity is still loose with a credit-to-deposit ratio (LDR) at the level of 78 percent," he said.

In addition, he said the loose liquidity was also evident from the bank's liquid assets, which were dominated by the placement of assets in Government Securities (SBN) and with Bank Indonesia.

In terms of asset quality, Gross NPL was maintained at the level of 3.1 percent, but was still overshadowed by the potential for increased risk from restructured loans with a Loan at Risk ratio of 19.8 percent and a restructuring credit ratio of 16.4 percent. However, when compared to 2020, the credit risk ratio shows an improving trend.

"As a form of mitigating credit risk, banks continue to gradually increase CKPN (Reserve for Impairment Losses) which has reached IDR 353.7 trillion as of February 2022. So that the coverage ratio of CKPN to NPL is already relatively high, reaching 199.4 percent," he said.

For your information, since 2020, LPS has cut the Guarantee Interest Rate by 250 bps for deposits in rupiah at commercial banks and rural banks and by 150 bps for deposits in foreign currency at commercial banks.

Currently, LPS has set a Guarantee Interest Rate of 3.50 percent for rupiah deposits for commercial banks, 0.25 percent for foreign currency deposits for commercial banks, and 6 percent for rupiah deposits in rural banks, which is valid from January 29, 2022 to May 27, 2022.