Banking - Strategies of a number of digital banks to reduce NPL

Bank - Strategies of a number of digital banks to reduce NPL Several digital banks remain in the spotlight due to rising non-performing loan (NPL) ratios. OJK Banking Supervision Chief Executive Dian Ediana Rae recently stated that while NPLs at digital banks are generally within reasonable limits and trending downwards, credit channeling schemes require attention. "The partnership schemes between banks and fintech lenders through channeling introduce risks from both internal and external factors," Rae explained. Internally, banks need to sharpen their credit scoring capabilities. Externally, the fluctuating global economy significantly impacts the value of financial assets. "This requires banks partnering with fintech companies to adopt stricter risk management policies and technological innovations to enhance security and operational efficiency," Rae stated. (Source : Kontan) Comment : Looking ahead, robust risk profiles and Know Your Customer (KYC) procedures will be crucial for maintaining low NPLs. Selective funding channeling growth and effective loan risk management will also support healthy credit risk. Within existing portfolios, risk appetite and tolerance on a sector-by-sector basis will play a crucial role in managing special mention loans (SMLs) and reducing NPLs. Finally, the underwriting and loan approval processes should be reviewed and categorized based on risk levels. We maintain our positive outlook for the banking sector.