Government Gives Liquidity Injection to the Banking Sector

9 months ago . 1 min read
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Marella Putri
Writer at Forbes Indonesia
Government Gives Liquidity Injection to the Banking Sector

by Elisa Valenta

The Indonesian government has issued a regulation allowing the disbursement of relief funds to the banking sector to help lenders cope with the financial impacts of the COVID-19 outbreak.

Under the Government Regulation (PP) No. 23/2020 on the national economic recovery program, which took effect since May 11, the funds will be placed to what is called "participating banks", which will then channel the funds to the "executing banks" for loan restructuring and added liquidity. In return, the government will receive a certain amount of interest.

According to the new regulation, the “participating banks” are those with at least a 51% ownership by Indonesian individuals and/or Indonesian entities, and among the country’s top 15 lenders in terms of assets. The bank should also be categorized as healthy banks by the Financial Services Authority (OJK) assessment. The "executing banks" should also be healthy and provide solid collateral. 

Indonesia's 15 biggest banks by assets

“The participating banks will later function as supporting banks to provide liquidity for [other] banks, including secondary banks, that have also provided loan restructuring and disbursed additional loans to businesses,” said the document signed by President Joko ‘Jokowi’ Widodo.

Earlier, Jokowi has urged banks to loosen their loan terms to debtors and provide restructuring schemes. Number of debtors that are unable to repay in time is growing amid massive job losses or salary cuts due to the pandemic.

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Marella Putri
Writer at Forbes Indonesia
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