Behold, A Tsunami of Bankruptcies on the Horizon

Wave of bankruptcies
Summary

  • Large banks have drastically slashed deposit rates, putting a risk on lowering lending rates. The measure was taken amid the mounting bankruptcy risks, which have been overshadowing the business world amid the Covid-19 pandemic.
  • More than 500 bankruptcy cases were registered so far this year. A total of 15 public companies are facing bankruptcy claims, most of which are property companies. Meanwhile, more than Rp 800 trillion in loans from millions of Micro, Small, and Medium Enterprises (MSME) and non-MSME debtors had undergone pandemic-related restructuring.
  • Various survey results showed that most businesses had seen a lower-income amid the pandemic, with MSME businesses were reportedly the most vulnerable to bankruptcy due to limited capital.
  • The bank's policy of slashing interest rates benefits not only the business world but also the banking sector itself, as well as the government. For banks, the interest expense paid to customers eased. As for the government, funds from bank deposits would likely shift to government bonds for budget financing.

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