Banks’ Non-Performing Loans: A Ticking Time Bomb
![Time bomb](https://cdn1.katadata.co.id/media/dinsights/images/thumb/2019/11/18/2019_11_18-00_33_27_a6296259ecec341e91b7ca864b7ac179_620x413_thumb.jpg)
Summary
- Banks are under massive pressure due to the high number of non-performing loans (NPLs), despite implementing COVID-19-related programs of credit restructuring. The NPL ratio hit three percent of the total bank credits, the highest in nearly three years.
- The three sectors receiving the most substantial credit disbursements from banks - wholesale, manufacturing, and household sectors - show upward trends of the NPL ratios. Several other industries also recorded high NPL ratios.
- A D-Insights source revealed that the NPL increase occurs since some loans are ineligible to the restructuring relaxation program related to COVID-19. Besides, some technical glitches also happen during the credit restructuring processes.
- The ability to pay micro, small and medium borrowers will remain low. McKinsey Global Institute predicts that national banking income from the microcredit segment will fall the farthest from expectations, followed by the small and medium sector.