On 16 March 2020, the Financial Services Authority (Otoritas Jasa Keuangan/OJK) has issued OJK Regulation No. 11/POJK.03/2020 concerning National Economic Stimulus as Countercyclical Policy to the Coronavirus Disease 2019 Outbreak (“POJK 11/2020”) which shall be applicable for up to 31 March 2021, to support economic growth for debtors affected by the COVID-19 pandemic which include Micro, Small, and Medium Enterprises (MSME) debtors and banks are allowed to provide relaxation in respect of credit requirements or to restructure loans of their debtors.
This regulation applies to: (i) conventional commercial banks including its sharia business unit, (ii) sharia commercial banks, (iii) rural banks (Bank Perkreditan Rakyat - BPR), and (iv) sharia rural banks (Bank Perkreditan RakyatSyariah - BPRS). Pursuant thereto, credit relaxation or loan restructuring due to COVID-19 may be granted for the following debtors (other than MSME debtors):
- significantly affected by the reduction of import-export volume due to supply chain dependence and trade with China or other countries impacted by COVID-19;
- affected by the suspension of infrastructure construction projects due to the halt in the supply of raw materials, manpower and machines from China or other countries impacted by COVID-19; and/or
- affected by travel warnings or the closure of transportation routes and tourism to and from China and/or other countries due to COVID-19.
Moreover, banks may implement the following policies to support the stimulus of economic growth with due regard to the prudential principal for debtors that are experiencing difficulties in fulfilling its obligations as a result of its business impacted by COVID-19 outbreak:
1.Asset quality determination
During normal circumstances, banks are required to assess and determine debtors’ credit based on its business prospects, working governance and ability to pay. However, pursuant to POJK 11/2020, Banks can now determine the asset quality of the affected debtors (including MSME debtors) with credit ceilings of up to IDR10 billion only based on timely payment of the loan’s principal and/or interests (applicable for conventional banks), or margin/profit-sharing/ujrah (applicable for sharia banks).
All credits or financing quality of the affected debtors which have been restructured in accordance with POJK 11/2020 shall be classified as ‘performing’ (lancar). The restructuring may be conducted for credits or financing provided before or after the relevant debtors are affected by COVID-19 outbreak. However, it is important to note that in conducting a restructuring, banks should also consider the implementation of its own risk management and guidelines comprising at least certain criteria to determine which debtors (including MSME debtors) and the relevant sectors impacted by COVID-19.
3.Provision of new funding
Banks are also authorized to grant new credit or financing and/or other new funding to debtors (including MSME debtors) affected by COVID-19. Asset quality determination for the foregoing will be done separately from the asset quality determination for the previous credit, financing, and/or other funding.
For funding amounting up to IDR 10 billion, the credit quality determination shall be based on timely payment of the loan’s principal and/or interests (applicable for conventional banks), or margin/profit-sharing/ujrah (applicable for sharia banks). For funding amounting more than IDR 10 billion, the credit quality determination shall be in accordance with the requirements under OJK regulations concerning asset quality assessment.
Banks that are undertaking asset quality determination or credit restructuring pursuant to this POJK 11/2020 must submit reports to the OJK regarding implementation of the foregoing on April 2020, June 2020, September 2002, December 2020 and March 2021.
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