www.thejakartaglobe.com - The central bank introduced a regulation on Friday aimed at preventing potentially dangerous bubbles by encouraging prudent banking practices and curbing excessive consumer loan growth.
Under the regulation, Bank Indonesia will limit the size of housing loans and set a minimum for down payments for vehicle purchases.
“Considering that there’s an increasing demand for housing and automotive loans and an excessive growth in both segments, Bank Indonesia sees a need to introduce more prudent practices in loan disbursements,” the central bank said in a statement published on its Web site. (source)
The new regulation caps housing loans at 70 percent of the value of the home, and requires a minimum down payment of 30 percent for private car loans.
It also set a minimum down payment of 25 percent for purchases of motorcycles and work vehicles.
Properties measuring less than 70 square meters are not subject to the new regulation, the central bank said.
The statement said the new regulation would help “safeguard the economy to face future challenges in the financial sector.” It also said that by requiring minimum payments for housing and vehicle purchases, the potential risks posed by excessive growth in the housing and auto loan markets would be minimized.
Bank Indonesia said the country’s lenders would have three months to implement the new rules, meaning they would become effective in June.
Darmin Nasution, the central bank governor, said the regulation was aimed at slowing down consumer lending and that its impact on overall lending growth would be minimal. Bank Indonesia forecast lending by the country’s 120 commercial banks to grow by 27 percent this year, compared to 24 percent last year.
Helmi Arman, an economist at Citigroup in Jakarta, said slower loan growth in the housing and automotive sectors was unlikely to have a large impact on overall loan growth.
“Although both automotive and housing loans have been growing at rates of around 30 percent, the portion for overall lending is only 5 percent for the former and 8 percent for the latter,” Helmi said in a note to clients on Friday, a copy of which was obtained by the Jakarta Globe.
Helmi said the regulation was aimed at strengthening the country’s financial system by way of preventing excessive loan growth in the consumer sector.
“It will discourage middle-income [consumers] from liquidating their time deposits and using them as down payments in speculative housing loans,” he said.
Gunawan, a director of Indomobil Finance, the financing unit of Indomobil Sukses Internasional, said the new regulation would further improve the quality of loans that were disbursed.
“I think banks and finance companies have implemented prudent loan practices,” Gunawan said. “The bad loan ratio is low in the country.”
Economists in Jakarta said the regulation was meant to cool consumer demand after the central bank opted to maintain its benchmark rate early this month.
Car sales rose to a record 894,000 units last year and motorcycle sales were at an all-time high of eight million units, according to the Indonesian Automotive Industry Association (Gaikindo). Typically, 80 percent of purchases of cars and motorcycle are financed by loans.
Indonesia’s $813 billion economy expanded 6.5 percent last year. Also in 2011, Bank Indonesia cut its benchmark rate by 50 basis points to a record low 6 percent, seeking to spur economic growth, and private consumption accounted for 56 percent of economic activity.
Source : http://www.thejakartaglobe.com/home/indonesia-sets-rules-for-home-vehicle-loans-to-prevent-bubble/505215 - March 16, 2012
No comments:
Post a Comment