Non-Performing Loan Ratio at Rural Banks Increases, Reaching 11% in Q2 2024

Based on data from the Financial Services Authority (OJK), as of May 2024, People's Credit Banks (BPRs) nationwide had disbursed Rp143.92 trillion in credit.

The value of non-performing loans (NPLs), categorized as overdue/doubtful/substandard, reached Rp16.37 trillion, equivalent to 11.37% of the total disbursement.

The BPR NPL ratio, or ratio of problematic loans, exceeded 11% for the first time in April, or at the beginning of the second quarter of 2024. This ratio is the highest in the last five years, as shown in the graph.

According to information from the OCBC Bank website, an NPL ratio in the range of 8-12% is considered "unhealthy."

However, Dian Ediana Rae, Executive Head of Banking Supervision at the OJK, stated that the overall performance of BPRs is good, with only a few experiencing problems.

"Overall, the performance of BPRs is good, but a handful are still experiencing fundamental issues, even related to fraud," said Dian Ediana Rae, as reported by Antara on Monday (July 29, 2024).

"Therefore, it's not surprising that the Executive Head of Banking Supervision has recently been forced to close several BPRs. This is all, of course, in the context of strengthening our banking sector," she added.

In the first half of this year, the OJK revoked the business licenses of 14 BPRs, namely:

1. BPR Wijaya Kusuma (business license revocation date: January 11, 2024)
2. BPRS Mojo Artho Kota Mojokerto (January 31, 2024)
3. BPR Usaha Madani Karya Mulia (February 13, 2024)
4. BPR Bank Pasar Bhakti (February 16, 2024)
5. BPR Bank Purworejo (February 21, 2024)
6. BPR EDC Cash (February 28, 2024)
7. BPR Aceh Utara (March 4, 2024)
8. BPR Sembilan Mutiara (April 3, 2024)
9. BPR Bali Artha Anugrah (April 4, 2024)
10. BPRS Saka Dana Mulia (April 19, 2024)
11. BPR Dananta (April 30, 2024)
12. BPR Bank Jepara Artha (May 22, 2024)
13. BPR Lubuk Raya Mandiri (July 23, 2024)
14. BPR Sumber Artha Waru Agung (July 24, 2024)

Note that BPRs are banking institutions that operate conventionally or based on sharia principles, but do not provide payment transaction services.

BPR business activities are also more limited than those of general banks, as BPRs are prohibited from accepting demand deposits, engaging in foreign exchange transactions, and undertaking insurance activities.

The following are the business activities that BPRs can undertake, based on information from the OJK:

* Collecting funds from the public in the form of time deposits, savings, and/or other similar forms;
* Providing credit;
* Providing financing and fund placement based on sharia principles, in accordance with regulations set by Bank Indonesia;
* Placing funds in the form of Bank Indonesia Certificates (SBI), time deposits, deposit certificates, and/or savings accounts at other banks.