The banking industry continues to strengthen reserves, this is done to maintain credit quality due to the co-19 credit restructuring relaxation policy which ended in March 2023. The Financial Services Authority (OJK) recorded a bank credit restructuring value of IDR 427.7 trillion as of February 2023. The restructuring distribution was equivalent to the number of Covid-19 restructuring debtors of 1.93 million customers. OJK Banking Supervision Chief Executive Dian Ediana Rae said, the decline in Covid-19 credit restructuring indicated that the community's economic recovery had taken place.
Even so, it is said that the OJK will continue to monitor and ensure that the cessation of the restructuring policy does not disrupt bank non-performing loans.
OJK also asked banks to prepare reserves in line with the cessation of restructuring policies.
"Banks are also paying attention to portfolios of state securities and encouraging controlled liquidity management due to the increase in global benchmark interest rates," he said recently.
Senior Vice President of the Indonesian Banking Development Institute (LPPI) Trioksa Siahaan assessed that the OJK's appeal regarding this matter was a precautionary step after what happened to the collapsing banks in America and Europe, so banks in Indonesia need to be more careful.
"Increasing reserves will reduce performance, but banks can be healthier and stronger," said Trioksa, Sunday (9/4).
According to him, the strategy that needs to be carried out by banks is to be more careful and selective in extending credit and strengthening credit monitoring so that credit quality can be maintained and non-performing loans (NPLs) can be kept low.
Banking Observer Paul Sutaryono also said that the credit restructuring program was extended to 31 March 2024 for certain sectors. For example, the MSME sector, the food and drink accommodation provision sector and sectors that absorb a lot of labor such as textiles and textile products (TPT).
"However, banks are required to hoist reserves as high as possible. This is important to absorb potential credit risk, market risk, operational risk and liquidity risk," he said.
Apart from that, said Paul, banks are also required to improve credit quality, namely by being more careful in extending credit. Thus, NPL can be more controlled.
For example, Bank Mandiri, will strengthen reserves to maintain credit quality. The Company has implemented prudent credit reserves (CKPN) in accordance with the debtor's risk profile and projected credit quality.
"Especially for the Covid restructuring portfolio, the Bank has formed a CKPN of IDR 5.3 trillion in the position of February 2023, which is equivalent to the Covid NPL coverage of around 300% which we think is very adequate," said Bank Mandiri Director of Risk Management Ahmad Siddik Badruddin.
Siddik explained, based on the evaluation, most of the Covid Restructuring portfolio had shown improvement and were expected to survive and be able to return to paying their financial obligations.
However, in the face of a potential decline in credit quality, the Bank continues to closely monitor debtors' business conditions, including through the Early Warning Signal or Watch List indicators, as well as monitoring the fulfillment of obligations to banks, especially for Covid Restructuring debtors.
To note, in February 2023, Bank Mandiri's Covid Restructuring portfolio amounted to Rp. 32.9 trillion, which has decreased significantly compared to the highest position in June 2021 of Rp. 96.5 trillion and has decreased from December 2022's position of Rp. 36 trillion.
"The quality of the Covid restructuring portfolio shows quite encouraging conditions, where 82.5% of the Covid restructuring portfolio is in collectibility 1, 12.2% in collectibility 2, and only 5.3% has NPL status," he explained.
Referring to OJK Board of Commissioners Decision Number 34/KDK.03/2022, around 70% of Bank Mandiri's Covid Restructuring portfolio did not meet sectoral or regional criteria to obtain a selective Covid Restructuring extension.
However, of this amount, only around 3-4% have the potential to default after March 2023, the rest are expected to return to normal. If there are debtors who still require further restructuring, then the debtor will be restructured using a non-covid/regular restructuring scheme.
On the other hand, around 85% of Bank Mandiri's Covid Restructuring portfolio debtors are estimated to have been able to pay their obligations. This reflects an improvement in business conditions and the ability to meet credit payment obligations.
