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State-owned Bank Mandiri, increasingly burdened by mounting
non-performing loans (NPLs) from large companies, has received a nod
from the government to take legal action against recalcitrant debtors.
"I've asked Mandiri's management to look into such legal options if the
debtors indeed remain defiant," State Minister for State Enterprises
Sugiharto said Monday.
"Mandiri has given too much tolerance to such debtors."
Sugiharto refused to name the companies.
Mandiri president Agus D. Martowardojo has mentioned planning to sue 30
borrowers with NPLs of over Rp 1 trillion each (US$110 million) --
among them are Garuda Mas Group, PT Kiani Kertas, Domba Mas Group, PT
Garuda Indonesia, A Latief Group and Bosowa Group -- if they do not
show good faith and settle their debts.
Mandiri's NPLs as of July 27 amounted to Rp 26.4 trillion, or 26.4
percent of its total loans, although this is already down from its Rp
27.1 trillion, or 27.7 percent, position as of May 30. The 30 large
debtors make up 56 percent of the NPLs, at Rp 14.8 trillion, down from
75 percent.
Sugiharto said Mandiri's management also could take "common" corporate
actions to resolve the problematic loans -- such as rescheduling them,
or requesting more collateral.
However, if the bank decided to pursue legal action to collect the
debts, then the government -- which has a 68 percent stake in Mandiri
-- would support it.
"In principle, any debtors that are uncooperative and that have
contributed in causing Mandiri's recent rise in bad loans should be
handled through legal channels," Sugiharto said.
Mandiri director for special assets management Riswinandi said the
lender expected to be able to collect another Rp 4 trillion in debts by
the end of the year, from Domba Mas Group, Argo Pantes, Flora Sawita
and Pasific Andes.
Besides Mandiri, Bank Negara Indonesia (BNI), the second largest
lender, has also been wrestling with rising NPLs. This comes at a time
when both state banks are bidding to become an "anchor bank", trying to
fulfill by 2007 the central bank's 5 percent maximum net NPL
requirement.
The government recently said it would help state banks, by revising a
regulation on state assets that had stopped state lenders from taking
prompt debt-resolution measures -- including write-offs -- like private
banks.
However, Finance Minister Sri Mulyani Indrawati has not followed up the
planned revision.
The government also plans to set up an oversight committee for the
state bank's debt resolution scheme.
Sugiharto said Mandiri management planned to discuss the committee
further with Mulyani.
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