Banking - Amidst bad-credit plague, OJK to increase online credit limit to IDR10 bn

Banking - Amidst bad-credit plague, OJK to increase online credit limit to IDR10 bn Financial Services Authority is planning to raise online credit limit to IDR10 bn for certain sectors. In the official statement, OJK believes the plan aligns with Law No.4/2024 regarding the development and improvement of finance sector (UU P2SK). “It is still a draft of new OJK regulation. Said draft may undergo another improvement, putting opinion and inputs from various parties,” added OJK. In the future, there will be a certain condition for the lender to access the loan facility with a limit of up to IDR10 bn. The first is the credit is aimed for productive financing instead on consumptive credit. Then, the risk of default within 90 days of online loan platform is limited to 5%. For the record, OJK had previously agreed upon online credit limit of IDR2 bn for productive loans. However, this limit increase is said to go in accordance with the roadmap of the development and improvement of information-and-technology-based joint financing services of 2023-2028 designed by OJK. According to IDNFinancials data, OJK is currently highlighting the above-average bad credit rate in peer-to-peer (P2P) lending platforms. As of mid-July, there have been 15 P2P lending companies with risk of default within 90 days that went over the limit of 5%. (Source : IDN Financials). Comment : We share the same opinion with OJK that online credit should be limited, especially following the demand spike from high risk profile potential debtors. We believe post the implementation of the regulation, high risk profile debtors portion will decline and benefit banks non performing loan. Maintain our overweight stance for banking sector with BBRI and BBNI as our pick.