Friday, 20th October 2017

Indonesian Central Bank says to curb high credit growth

27th August 2012 | 2.255 Views
Indonesian Central Bank says to curb high credit growth
Darmin Nasution. (ANTARA)
Jakarta (ANTARA News) - Bank Indonesia Governor Darmin Nasution said on Monday that the bank will aim to curb its high credit growth, which has reached 25.8 percent, in the first half of 2012.

"Our credit growth has been very high, although the ratio is still relatively low," he said.

Over the last three years, the bank`s credit growth has always stayed above 23 percent, but this year it could range between 25 percent and 26 percent, Nasution added.

The high credit growth is still relatively safe for investing in export goods, but the fact is that the credit entry is actually used for producing investment goods for domestic consumption, including in the real estate sector.

"Therefore we would like to cut the credit growth in the real estate sector with a loan to value (LTV), whose impact will be minimal," Nasution stated.

The real estate sector has grown rapidly, triggering fears that this could lead to high economic inflation as well as a sizeable deficit.

"The economic inflation depends on whether we can encourage loans that are intended for investment in export goods production," Nasution noted.

Bank Indonesia has implemented a minimum 30 percent down payment regulation for consumers looking to buy houses that came into effect on June 15, along with a 25 percent minimum down payment for motorcycle possession and a 30 percent limit for buying cars.

Halim Alamsyah, the former Deputy Governor for Banking Supervision at Bank Indonesia, said the decision to revise loan targets to 25 percent from 23 to 24 percent is higher than the growth trend over the last few years.

An increase in credit growth could destabilize the national economy, so central banks want to retract banking in areas that are not experiencing fast gains, such as consumer loans because their productive credit growth cannot be curbed.