Do­mes­tic bank lend­ing for oil, gas and min­ing sec­tors is still very small: BI

The Pak Banker - - Company& -

JAKARTA: Bank In­done­sia (BI) recorded that do­mes­tic bank lend­ing to the oil, gas, and min­ing sec­tors is still very small, con­tribut­ing only around 3.17 per­cent of to­tal banks' out­stand­ing lend­ing.

Ir­wan Lu­bis, head of the re­search and bank­ing reg­u­lat­ing bureau at the cen­tral bank, said that bank lend­ing to the sec­tors amounted to only around Rp 53 tril­lion (US$5.86 bil­lion) out of do­mes­tic banks' to­tal out­stand­ing loans, cur­rently val­ued around Rp 1,700 tril­lion.

"It's only 3.17 per­cent of to­tal lend­ing, mean­ing the gap is very big," Ir­wan said dur­ing a sem­i­nar on en­ergy and min­ing last week.

Most lend­ing to the sec­tors went to oil and gas, ac­count­ing for 65 per­cent of the to­tal, he said, adding that the sec­ond high­est amount went to In­done­sia's coal in­dus­try, ac­count­ing for 24 per­cent. Ir­wan said that, as debtors, the oil, gas, and min­ing sec­tors ac­tu­ally showed good per­for­mance.

"The sec­tors' gross NPL (non-per­form­ing loans) is only 2.14 per­cent, which is lower than the av­er­age na­tional NPL for to­tal bank lend­ing. This should en­cour­age banks to pro­vide more lend­ing to the sec­tors," he said.

De­spite the pos­i­tive in­di­ca­tor, cur­rent lend­ing from do­mes­tic banks to the oil, gas, and min­ing sec­tors is still very low be­cause, among other rea­sons, the banks' lack of knowl­edge about the in­dus­try, Ir­wan said. "The biggest fac­tor con­tribut­ing to the low lend­ing is the banks' lack of knowl­edge for an­a­lyz­ing both risks and op­por­tu­ni­ties. Bank ac­count of­fi­cers some­times do not have suf­fi­cient knowl­edge of the in­dus­try," Ir­wan said, adding that this ob­sta­cle could be over­come through in­tense di­a­logue be­tween banks and in­dus­try play­ers.

An­other ob­sta­cle ham­per­ing do­mes­tic bank lend­ing to the in­dus­tries is the long in­vest­ment pe­riod for oil, gas, and min­ing projects. "Most banks' funds are short-term, thus, there is po­ten­tial for a liq­uid­ity mis­match," he said.

How­ever, so­lu­tions for this should be ne­go­ti­ated by both par­ties, he added. Ir­wan said BI, as the mon­e­tary author­ity, would is­sue sev­eral reg­u­la­tions to help the oil, gas, min­ing, and other sec­tors, to ac­cess cap­i­tal at rea­son­able rates. "BI will force banks to be more trans- par­ent re­gard­ing the ba­sis of their lend­ing rates. There will be sev­eral reg­u­la­tions forc­ing banks to be more com­pet­i­tive in terms of lend­ing rates so busi­nesses will ben­e­fit from this," he said.

Oil and gas is one of the most cap­i­tal in­ten­sive in­dus­tries. Up­stream oil and gas reg­u­la­tor BPMi­gas es­ti­mates that oil and gas contractors op­er­at­ing in In­done­sia will spend $18.9 bil­lion in 2011, up from about $13 bil­lion es­ti­mated to be spent this year. De­spite the huge fi­nance re­quire­ments, Ir­wan said do­mes­tic banks were still ca­pa­ble of pro­vid­ing the cap­i­tal. "The do­mes­tic banks can form con­sor­tiums for this pur­pose," he said. The ma­jor in­ter­ac­tion be­tween oil and gas com­pa­nies and do­mes­tic banks is cur­rently in trans­ac­tion fa­cil­i­ta­tion. -PB News

LA­HORE: Chaudhry Khalid, Chaudhry Sa­j­jad and Chaudhry Riaz pre­sent­ing a cheque of Rs. 1.4m to PML-N Chief Muham­mad Nawaz Sharif for the af­fectees of Kaghan fire in­ci­dent. -App

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