The Financial Services Authority Claims Banking Conditions Are Maintained But Doesn't Deny Potential Risks

OJK. (Photo: By courtesy)

JAKARTA - Deputy Commissioner for Banking Supervision I of the Financial Services Authority (OJK), Teguh Supangkat, said that in general the condition of financial service institutions, especially banks, is well maintained. However, he did not deny that there was a real potential risk in the current pandemic.

"Banking is currently in good condition and it can be seen from the positive growth of TPF (third party funds)", he said in a webinar organized by the Indonesia Banking School, Friday, April 30.

Teguh added that, although from the liquidity aspect, it shows a signal of certainty, this brings pressure to banks because they have to provide returns to fund owners in the form of interest and yields. On the other hand, intermediation performance is still on hold.

"Another challenge currently facing banks is how to encourage these funds to be distributed to the public in the form of credit so that the banking intermediary function can run properly", he said.

Based on data released by the OJK, credit in March 2021 was recorded to have grown by IDR 77.3 trillion on a month-to-month (mtm) basis. This figure is indeed the highest growth in the last 11 months, although on a year-on-year basis it is still on a sloping trend with a contraction of 3.77 percent.

By sector, credit for the manufacturing sector and the trade sector increased significantly by IDR 22.02 trillion mtm and IDR 16.40 trillion mtm respectively.

"Our efforts at OJK continue to build synergies with all stakeholders, namely the monetary authority (Bank Indonesia), the fiscal authority (Ministry of Finance), and the LPS (Deposit Insurance Corporation)", he added.

Meanwhile, one of the important policies released from the collaboration of the four institutions was the setting of a fairly sloping reference interest rate with the intention of providing room for expansion to banks in channeling credit as well as financing.

VOI noted that the central bank continued its low-interest trend by setting the BI 7-Day Reverse Repo Rate (BI7DRR) at 3.50 percent. This level is the lowest margin in history ever set by the monetary authority.

BI directives are then transmitted by bank business actors through credit interest adjustments, albeit at a fairly limited rate.

OJK noted that the consumer sector credit interest rate fell from 10.95 percent (December 2020) to 10.90 percent in March 2021.

In the same position, working capital credit fell from 9.27 percent to 9.12 percent. Investment credit fell from 8.83 percent to 8.73 percent.

Meanwhile, on the liquidity side, the authorities claim that banks hold at least IDR 2.218 trillion as of January 2021 compared to the same period last year of IDR 1.241 trillion.

"We are sure that the banking sector will remain strong and continue to improve in terms of performance in line with the ongoing vaccination program and various relaxation policies", Teguh concluded.