The regulation was issued to increase the bank`s prudence in granting house and motor vehicle loans and to strengthen the financial sector`s resilience, Dody Budi Waluyo, the Central Bank`s Director of Strategic Planning and Public Relations, said.
Jakarta (ANTARA News) - The Indonesian central bank (Bank Indonesia) has issued a new regulation regarding the amount of loan-to-value (LTV) consumers can receive for a housing loan and for advances for motor vehicle credit.

Dody Budi Waluyo, the central bank`s Director of Strategic Planning and Public Relations, said on Friday that the regulation was issued to increase the bank`s prudence in granting house and motor vehicle loans and to strengthen the financial sector`s resilience.

The provision is contained in the Circular of Bank Indonesia No.14/10/DPNP, dated March 15, 2012, on the Risk Management Application on Banks that provide Home Ownership Loans and Motor Vehicle Credit.

Waluyo said that the LTV ratio measures the value of credits that can be provided by the bank against the value of the collateral at the time of finalizing the initial loan and sets a maximum of 70 percent for the loan.

The scope of mortgage loans may include the acquisition of residential property, including flats or apartments but not including home offices and home stores for buildings that extend beyond 70 square meters. LTV has so far excluded housing loans for compliance with the government`s housing program.

The requirement for a cash advance for motor vehicle ownership is defined as follows: two-wheel vehicles must have at least 25 percent of the loan as a down payment, four-wheelers must have at least 30 percent, and vehicles used for commercial business purposes with four or more wheels must have at least 20 percent.

A lower down payment for ownership of motor vehicles used for commercial business purposes is being considered in the interest of supporting business development.

Banks found to be in violation will receive administrative sanctions as stipulated in the Bank Indonesia Regulation (PBI) No.11/25/PBI/2009, dated July 1, 2009, with regard to the application of risk management.(*)

Editor: Heru Purwanto
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