Bank Mandiri can now restructure unncollected loans of Rp 32 trillion or $3.3 billion following a court ruling that changes the status of the debts.
Part of the benefit of the Indonesian court ruling is to allow Bank Mandiri to deduct the market value on non-performing loans.
Another benefit, according to Fitch Ratings, is a gain from their inherited non-performing loans that have been written off.
“This could bolster their core capitalization to maintain rapid loan growth amid limited fresh capital,” said Fitch.
President director of Mandiri, Zulkifli Zaini, said the state inherited a massive amount of uncollected loans from its predecessors, of which cases are being handled by the finance ministry.
Mandiri was derived from the merger of state-lenders, Bank Bumi Daya, Bank Dagang Negara, Bank Ekspor Impor and Bank Pembangunan Indonesia in 1999, a year after the country took the hardest punch from the Asian financial crisis that led to banks being liquidated.
Following the crisis, many debtors went bankrupt and were unable to payoff their loans. When the government took control of the four predecessors of Bank Mandiri, the uncollected debts became the government’s assets.
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