Bank Indonesia has tightened credit regulations affecting the automotive and housing sectors – measures first announced earlier this year designed to prevent economic overheating.
The government is concerned about the potential for excessive over-borrowing by consumers and wants to ensure stability in the country’s banking sector by reducing the potential for bad loans.
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Domestic consumption has been a key driver of the country’s 6-7% GDP growth over the last two years, fuelled by record low interbank interest rates – currently at 5.75%.
The Indonesian central bank introduced a 25% minimum down-payment threshold on passenger vehicle loans provided by finance companies, and 30% for those provided by retail banks. For commercial vehicles, the threshold is 25%. Previously, passenger vehicle loan downpayments averaged around 10-15%.
The automotive industry expects that many first-time buyers and lower income customers will be forced to delay purchases. In recent months, vehicle sales have rise to new highs in anticipation of the introduction of tougher lending rules, said Johnny Darmawan, director of PT Toyota Astra Motor.
Vehicle sales in May are estimated to have reached a new record high of around 95,000 units, but sales could weaken in the second half as a result of the new regulations.
