Pandemic-hit Indonesian borrowers to gain extension of credit relief rules until 2023

FILE PHOTO: A man walks through the door of Indonesia's central bank, Bank Indonesia, in Jakarta, Indonesia September 22, 2016.REUTERS/Iqro Rinaldi

JAKARTA (Reuters) - A relaxation of banking rules that make it easier for Indonesian borrowers hurt by the pandemic to restructure their loans will be extended until March 2023, the country's Financial Services Authority (OJK) said.

The extension will help "maintain national economic recovery momentum and banking stability as well as the performance of restructured COVID-19 debtors that have shown improvement," the regulator's chairman, Wimboh Santoso, said in a statement.

The relaxed rules call for banks to only look at one factor when assessing credit quality, namely whether borrowers can repay the principal in time. Previously, a borrower's overall financial condition and business prospects were also taken into account.

Outstanding restructured loans of borrowers hurt by the pandemic have declined to 778.9 trillion rupiah ($54.6 billion) as of July, the OJK said. These were given to about 5 million debtors, 71.5% of which were micro, small and medium businesses.

That compares with 971 trillion rupiah owed by 7.6 million borrowers as of end-2020, according to local media.

The OJK added, however, that the non-performing loan ratio had risen to 3.35% in July from 3.06% at the end of last year.

Indonesia's central bank has cut interest rates by a cummulative 150 basis points and injected over $57 billion worth of liquidity into the banking system to help southeast Asia's biggest economy weather the impact of the COVID-19 pandemic.