Profits of Indonesian banks up 47.7% on lending margins

Surge attributed to bank’s preference to maintain high lending margins despite low 10% lending growth.

Profits at state-owned banks increased 37.2 percent to Rp 18.1 trillion last year, from Rp 13.2 trillion in 2008.

Business leaders claimed the results demonstrated that banks were reluctant to lend to businesses during the crisis.

“The data show that banks intermediation function was not optimised and that they preferred to play it safe by putting their money in Bank Indonesia notes or, if they did lend, by charging high interest rates," said Djimanto, secretary general of the Indonesian Employers Association (Apindo).

Bank Indonesia had earlier admitted that its monetary policy had not succeeded in encouraging lending. The central bank lowered its key interest rate to a historic low of 6.5 percent last year. However, banks remained reluctant to lower their interest rates.

View the full article on the Jakarta Globe.