Indonesia loan growth slows with drawdown delays, NPLs under scrutiny

Malaysia-based investors are watching for signs of a recovery going into FY2026F.

Malaysia-based investors have expressed increased caution over the growth of bad loans in Indonesia, as well as concern if Indonesian banks are being pushed into “national service” roles.

Kuala Lumpur-based investors that manage ASEAN funds are relatively neutral on Indonesia, including the banking sector, according to a report by CGS International, based on discussions with the inventions with 10 institutional investors. Most have accepted lower loan growth assumptions for 2025.

Investors were notably “trying to dig deeper into the reason for an uptick in consumer loan NPLs (non-performing loans) across multiple products,” CGS International noted.

“Regarding government programmes, particularly for village cooperatives, investors were concerned about the credit risks and economics of these programmes and whether certain banks are being pushed into “national service” roles,” the report stated.

They also discussed deposit liquidity, where most of the Malaysia-based investors expressed their belief that conditions have bottomed out and could improve marginally in the coming quarters.

They also discussed observations of borrowers delaying loan drawdowns.

“We explained that within the wholesale segment we see several borrowers delaying loan drawdowns recently, while key large banks are becoming more conservative in growing the consumer loan book given the recent uptick in consumer loan NPLs,” CGS International said.

Overall, the investors' concerns are mostly macro-related, such as how the Indonesian government is tackling layoff concerns; as well as political, given the recent protests, it said.

“Most investors acknowledged the challenging operating environment this year but are watching for signs of a recovery going into FY2026F,” CGS International wrote.