Banking - Prabowo will erase the debts of 6 mn farmers and fishermen

Banking - Prabowo will erase the debts of 6 mn farmers and fishermen President Prabowo Subianto will erase the debts of 6 mn farmers and fishermen to the banks. He will also soon issue a presidential regulation (Perpres) for the debt forgiveness next week. That was conveyed by Prabowo's brother, Hashim Djojohadikusumo. Those debts, they say, prevent fishermen from obtaining credit from banks. This week, Mr. Prabowo might sign a presidential regulation for debt forgiveness" Mr. Supratman (Supratman Andi Agtas) is preparing everything according to the law, he said during a dialogue at the Kadin Tower, South Jakarta. I hope that next week he (Prabowo) will sign the presidential regulation on debt forgiveness. (There are) 5 mn-6 mn people with their families who will have a new life, and they will have the right to borrow again from the banks. The SLIK will not be closed at the Financial Services Authority (OJK)," he continued. Hashim said that the debts of farmers and fishermen to the banks range from IDR10 mn to IDR20 mn. These debts date back to the 1998 monetary crisis, the 2008 economic crisis, and so on. It turns out that all these debts have been written off for a long time and have been covered by bank insurance, but the bank's claims have not been removed. As a result, these 6 mn (farmers and fishermen) cannot get credit," Hashim revealed. (Source : Cnn Indonesia) Comment : In the collection process, a write off does not necessarily eliminates debtor obligation to pay the bad loan. We think the majority of the bad debt in SoE banks should be categorized as a write-off and not conditional write-off. That said, banks remain have the right to claim or collect the debt, assuming the debtor has the capability to pay their debt. However, to eliminate the claim and categorized the bad debt (since 1998) into a conditional write-off will have a long process and likely to face administration difficulties. Hence, all the historical write-off figure would not impact much on banks book, in our view. Maintain our OW stance for the banking sector.