Jakarta (Antara Bali) - Bank Indonesia (BI) said relaxation of macro prudential policy is necessary to revive the property sector, which is the leading sector in the country's economic recovery.
Relaxation of the policy would boost demand for property, Executive Director for Economy and Monetary Policy of the central bank Juda Agung Juda told reporters in a news conference here on Thursday.
Juda said revival of the property sector would have positive impact on other sectors such as construction, manufacturing , mining and service sectors, adding it is vital to sustain economic growth.
Therefore, credit expansion has to be encouraged to improve the performance of the property sector and to facilitate the people in buying houses, he said.
"Macro prudential policy is addressed mainly to credit expansion, which is currently still too weak," he added.
The central bank already relaxed its policy such as in Loan to Value Ratio (LTV) and Financing to Value Ratio (FTV) to encourage credit expansion for property, landed houses, low cost apartments and house store and house office buildings.
In a bid to encourage banks to boost credits , the central bank has raised the minimum limit of Loan to Financing Ratio from 78 percent to 80 percent with the maximum limit remaining unchanged at 92 percent.
The macro prudential policy would be effective as from August , 2016 and it is only for banks with non performing loan rate of below 5 percent in the housing sector and other sectors.
Yuda predicted that the policy would boost credit expansion by 10-12 percent (yoy) this year and the effect is expected to be significant on the banking sector and the people in the third quarter of this year.
"Our estimate puts credit growth at 10-12 percent in 2016 and the majority of banks would enjoy the LTV relaxation because in aggregate NPL is around 2.9 percent. Indeed, there are bank having NPL higher than 5 percent , but the majority is below 5 percent," he said.
Currently , the transmission of the relaxation policy in credit has not been optimum as credit in March grew only 8.7 percent from 6.4 percent in earlier months and in April it was only 8 percent, he noted.
The central bank has also relaxed its monetary policy by cutting its benchmark interest rate (BI rate) to 6.5 percent from 6.75 percent with interest on deposit facility reduced to 4.5 percent and lending facility lowered to 7 percent.
The central bank hopes that the series of policies would boost domestic demand that would result in stronger economic growth without disrupting macro economic stability amid the global slump. (WDY)
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