BI sets the LTV for housing credits at a maximum of 70 percent and sets the down payment for the purchase of a motorcycle at 25 percent, a car at 30 percent and vehicles for business purposes at 20 percent.
Jakarta (ANTARA News) - Bank Indonesia (BI) intends to reduce consumer credit growth by regulating the loan-to-value (LTV) ratio for housing and for down payments for motorcycle credits.

"BI is indeed boosting credit growth, but at the same time, it wants the growth in consumer credit to slow down. Also, BI prefers that credit should not be extended without a certain down payment amount," the Central Bank`s Governor Darmin Nasution said here on Friday.

BI issued Circular Number 14/10/DPNP on Friday regarding the implementation of risk management at banks providing housing loans and motorcycle credits.

In the circular, BI sets the LTV for housing credits at a maximum of 70 percent and sets the down payment for the purchase of a motorcycle at 25 percent, a car at 30 percent and vehicles for business purposes at 20 percent.

"The amounts are fixed in accordance with the current state of the real estate and vehicle sales markets and are also based on our observations of the situation in other countries. The decision has been under discussion for a year," Nasution said.

He noted that the Financial Institutions and Capital Market Supervisory Board (Bapepam-LK) had also agreed with the credit restriction and would issue a similar policy for financial institutions.

"This regulation will be even better since it is aimed at banks and financial institutions. Bapepam-LK will also issue the same regulation for financing institutions, although the percentages will be slightly different. If I am not mistaken, it is 5 percent lower," he said.

He acknowledged that consumer credits for housing and motor vehicles have grown from 24 to 33 percent or more than the total credit growth, which is only 24 to 25 percent.

"The impact of the regulation is not major, but it will slow down growth. We have already made the calculations. For example, if the down payment for housing credits is up by a certain percentage, credits will drop by a proportional percentage," he said.

Nasution said that in addition to reducing consumer credit, the decision was also aimed at slowing down the importation of motor vehicles.

"What we are facing now is that imports have grown faster than exports, and therefore, they must be slowed down. Cars and motorcycles are actually imported and then assembled in Indonesia," he said.

Nasution is optimistic that the limitation of credit for motor vehicles will not affect household budgets, much of which is being used by the government as the engine of Indonesia`s economic growth in 2012.

"Imports of cars and motorcycles are huge in number, but when they are calculated as consumption, their figures are not large," he said.

Based on the circular, the down payment for motorcycles used for business purposes is set lower than other vehicles to support those who will use the credit prudently for productive purposes.

The LTV, meanwhile, is set at a maximum of 70 percent for housing credits for apartments but not for home shops or home offices measuring more than 70 square meters.

An exception to the new restriction on LTV is applied to credits for the government`s housing program.(*)

Editor: Heru Purwanto
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