In an effort to boost the nation’s economic growth, Bank Indonesia issued Regulation No. 11/13/PBI/2009 on Maximum Credit Provision Limits by Community Credit Banks by ensuring that community credit banks focus on providing credit to productive sectors, particularly the micro, small, and medium scale enterprises. It is expected that the regulation will foster local development and guarantee the sustainability of community interests through the enhanced attention to principles of due diligence with respect to the provision of credit and other funds.
The General Provisions of the regulation sets out all the relevant definitions as used in the regulation. This includes a definition for the maximum credit provision limit which is defined as being the maximum amount that may be lent against the total capital of the Community Credit Bank. The regulation permits not only the extension of credit to other parties but also in inter-bank fund placements.
The primary feature of the regulation is the emphasis on prudential banking. Specifically, the focus is on ensuring that community credit banks implement principles of due diligence and care. This means that the community credit banks must pay particular attention to the ability of those that they may extend credit to, to pay any credit back.
The Regulation enumerates two types of recipients for the financing funds: (i) those individuals or entities that have a connection to the Bank, and; (ii) those individuals or entities that have no connection to the Bank. For the former, the percentage must not exceed 10% of the Community Credit Bank’s capital, whereas for the latter the percentage varies:
-
Financing funds in an inter-bank fund placement for other unrelated Banks is a maximum of 20%;
-
Financing funds in the form of credit for one unrelated creditor is a maximum of 20%, and;
-
Financing funds in the form of credit for one unrelated group is a maximum of 30%.
The maximum levels in the regulation are relatively higher than the percentage set in the earlier regulation, namely: Ministerial Decree No. 31/61/KEP/DIR of 1998. Nevertheless, it is worth noting that the financing contemplated in this regulation is to be guaranteed directly by the central/local governments or indirectly through their state/local owned enterprises. In essence, no serious losses should be suffered under the new requirements.
The Regulation was issued on 17 April 2009 and will come into force on 1 July 2009.
In an effort to boost the nation’s economic growth, Bank Indonesia issued Regulation No. 11/13/PBI/2009 on Maximum Credit Provision Limits by Community Credit Banks by ensuring that community credit banks focus on providing credit to productive sectors, particularly the micro, small, and medium scale enterprises. It is expected that the regulation will foster local development and guarantee the sustainability of community interests through the enhanced attention to principles of due diligence with respect to the provision of credit and other funds.
The General Provisions of the regulation sets out all the relevant definitions as used in the regulation. This includes a definition for the maximum credit provision limit which is defined as being the maximum amount that may be lent against the total capital of the Community Credit Bank. The regulation permits not only the extension of credit to other parties but also in inter-bank fund placements.
The primary feature of the regulation is the emphasis on prudential banking. Specifically, the focus is on ensuring that community credit banks implement principles of due diligence and care. This means that the community credit banks must pay particular attention to the ability of those that they may extend credit to, to pay any credit back.
The Regulation enumerates two types of recipients for the financing funds: (i) those individuals or entities that have a connection to the Bank, and; (ii) those individuals or entities that have no connection to the Bank. For the former, the percentage must not exceed 10% of the Community Credit Bank’s capital, whereas for the latter the percentage varies:
-
Financing funds in an inter-bank fund placement for other unrelated Banks is a maximum of 20%;
-
Financing funds in the form of credit for one unrelated creditor is a maximum of 20%, and;
-
Financing funds in the form of credit for one unrelated group is a maximum of 30%.
The maximum levels in the regulation are relatively higher than the percentage set in the earlier regulation, namely: Ministerial Decree No. 31/61/KEP/DIR of 1998. Nevertheless, it is worth noting that the financing contemplated in this regulation is to be guaranteed directly by the central/local governments or indirectly through their state/local owned enterprises. In essence, no serious losses should be suffered under the new requirements.
The Regulation was issued on 17 April 2009 and will come into force on 1 July 2009.
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