Riska Rahman (The Jakarta Post)
Mon 23 March 2020
The Financial Services Authority (OJK) has launched new stimulus measures to control the bad debt ratio of the banking and non-banking sectors and facilitate loan repayments in the context of the COVID-19 pandemic expected to hit businesses .
The first stimulus, regulated by a new OJK rule released Thursday, eases debt quality assessment and restructuring requirements for debtors hard hit by the spread of pneumonia-like illness.
Banks now only assess the quality of a loan worth up to 10 billion rupees ($ 594,282) on the basis of the debtor’s punctuality in paying principal and interest on the loan. Previously, banks also assessed the business prospects and financial condition of the debtor.
Banks are also allowed to declare a good loan despite the decline in quality due to the pandemic and not to classify it as a non-performing loan (NPL).
“Banks will also be more flexible in the control of bad debts and allow the former to continue to grant new loans to their debtors,” the OJK wrote in a statement on Thursday, adding that the rule is implemented from March 13. as of March 31, 2021.
Also read: Government allocates $ 8 billion to stimulate economy as businesses and workers suffer from impacts of COVID-19
Debtors who restructure their loans will get an improvement in the quality of their loans after the process and banks can implement such a policy for any loan amount.
The rule is expected to reduce the economic impacts of COVID-19 on banks due to the decline in debtor performance which could increase the risk of bad debts and disrupt the performance of banks and the country’s financial stability, the OJK added.
The relaxations also apply to small and medium-sized enterprises (SMEs), as well as beneficiaries of the government microcredit program (KUR).
In addition, the OJK is also considering an incentive for multi-finance companies to delay payments related to pipeline and joint financing programs with banks. Multifinancial companies would also be allowed to restructure their debts with the same restructuring method used in the banking sector, in particular for financing by the execution method.
To read also: Garuda, “seriously affected” by COVID-19, could restructure the obligations: minister
In the execution method, a loan disbursed by a bank to a multi-finance company will then be channeled to individuals or businesses with its trade receivables as collateral for the loan.
“We are [expanding the relaxations] not only for banks, but also for multi-financial companies so that the corporate sector can go about its business despite the COVID-19 pandemic, âOJK President Wimboh Santoso said in a separate statement.