Jakarta (ANTARA News) - Bank Indonesia or central bank said there are still banks recording loan to funding ratio (LFR) below the minimum level of 78 percent in the past five consecutive years indicating weak intermediacy performance.

The fact has prompted plan by the central bank to raise the minimum level of LFR from 78 percent, Deputy Governor of Bank Indonesia Erwin Rijanto said here on Friday.

The plan is expected to be implemented with a regulation to be issued in the second or third quarter of this year, Erwin said.

Most of the banks that failed to reach the minimum level of LFR were Business Activity Commercial Bank (BUKU) II, which has core capital between Rp1 trillion to Rp5 trillion, he said.

BUKU II are fairly successful in collecting third party funds but they failed in mobilizing the funds, he said, adding they invest the funds in the instrument of Bank Indonesia saving gaining from high interest rate.

Earlier the central bank said it would raise the minimum level of LFR now 78 percent with the maximum level set at 92 percent.

The central bank plans to raise the LFR minimum level hoping to increase bank credits in a bid to accelerate economic recovery.

"The level is yet to be decided. We want to boost credit supply, but we will remain within the corridor of prudence," Senior Deputy Governor of the central Mirza Adityaswara said here early thos week.

Mirza said if LFR is nearing the minimum level it indicates that banks did not function well in carry out their role of intermediacy.

Therefore the central bank wants to fix the supply sector that bank credits could be funneled out well to the public, he said.

He said the countrys economic growth fell below target at 4.92 percent in the first quarter of this year, therefore, extra hard works would be needed to boost the growth, such as by more aggressive credit expansion, he said.

Bank Indonesia noted slowdown in credit expansion in April, 2016 growing only 7.7 percent year-on-year to Rp4,036.3 trillion from 8.$ percent year-on-year in March.

The sluggish growth in April was attributable to 4.8 percent growth for working capital credits to Rp1.846 trillion, the central bank said here on Tuesday.

Working capital credits in the trade, hotel and restaurant sector grew only 6.1 percent down from a growth of 7.9 percent in March year-on-year.

"Credits for mining sector shrank 30.6 percent in April after a 23.2 percent decline year-on-year in March," the central bank said in a statement.

However, a healthy growth of 12.2 percent was recorded in investment credits in April up from a 11.6 percent increase in investment credits in March

Similarly credits for micro, small and medium enterprises grew 8.3 percent year-on-year to Rp745.3 trillion stronger than a growth of 7.8 percent in March.

A fairly good growth of 11.4 percent was recorded in property credit to Rp631.8 trillion in April or the same as in March, and credits for the construction sector grew stronger by 14.2 percent.

The sluggish growth of credit expansion resulted in slower growth of 7.1 percent in economic liquidity in April from 7.4 percent in the previous month.

He said the central bank, however, has to maintain good credit quality to prevent an increase in non performing loan (NPL).

Based on the Indonesian banking statistics, the LFR in the first quarter of this year fell to 89.6 percent from 92.11 percent in the last quarter of 2015.(*)

Editor: Heru Purwanto
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