Indonesia's Banking Is Getting Tougher, OJK Records Loans Growing 8.54 Percent In July 2023

Illustration of the Rupiah (Photo: Doc. Antara)

JAKARTA - The Board of Commissioners (RDK) of the Financial Services Authority (OJK) stated that the Indonesian banking sector remains resilient with maintained intermediation functions and strong capital amid the volatility of the European and Chinese markets that tend to weaken.

Chief Executive of Banking Supervision of the Financial Services Authority (OJK) Dian Ediana Rae revealed, in July 2023, bank industry loans grew 8.54 percent year on year (yoy) to Rp6.68 trillion compared to last June which was recorded at 7.76 percent.

"With the highest growth in investment credit of Rp. 11.15 percent yoy," said Dian in a virtual press conference for the August 2023 RDK which was held virtually, Tuesday, September 5.

Based on the type of ownership, Dian said that if the credit growth of state-owned banks grew, it was 9.81 percent yoy. On an annual basis, the growth of Third Party Funds (DPK) in July 2023 was 6.62 percent yoy from the previous 5.79 percent yoy or to Rp8.06 trillion with the highest growth occurring in demand by 10.92 percent yoy.

"OJK encourages intermediation performance while maintaining a balance between financing growth and maintaining liquidity," added Dian.

The banking liquidity in July 2023 is at an adequate level with a maintained liquidity ratio.

He detailed that the Liquid Equipment Ratio or Non-Core Deposit (AL/NCD) and Third Party Fund Liquid Equipment (AL/DPK) fell to 118.37 and 26.57 percent, respectively.

Dian added that credit quality was maintained with a Non Performing Loan (NPL) ratio of 0.80 percent from last June of 0.77 percent and a gross NPL of 2.51 percent.

"Meanwhile, the ongoing recovery in the real impurity has pushed the decline in Covid-19 restructuring loans by Rp21.91 trillion to Rp339.13 trillion, with the number of customers which also decreased by 90 thousand to 1.48 million customers from a total of 1.57 million customers," said Dian.

With the decline in the number of restructuring loans, it also pushed the Loan at Risk (LAR) down to 12.59 percent from last June to 13.17 percent.

The number of Covid-19 restructuring loans that have targeted segmentally, sectorally, industry, and certain regions that require additional financing credit restructuring for 1 year until March 31, 2024, is 45.5 percent of the total restructuring loan portion or IDR 154.3 trillion.

On the other hand. for market risk, Dian explained that market risk is also relatively low, as reviewed from the stable Neto Foreign Exchange Position (PDN) of 1.75 percent from last June 1.50 percent and is well below the 20 percent threshold.

Meanwhile, the risk of interest rates remains under control by sloping domestic inflation so that interest rates are relatively stable.

"To anticipate potential risks that may arise in the future, the condition of the banking industry is recorded as a resilience with the banking industry's Capital Adequacy Ratio (CAR) of 27.46 percent," concluded Dian.