Indonesia will limit the size of housing loans and set minimum downpayments for auto purchases as it seeks to prevent price bubbles and excessive lending in Southeast Asia's largest economy, the central bank said on Friday.
The move may signal the central bank, which has slashed its benchmark interest rate in recent months, is considering ways to tighten policy without lifting rates as it eyes inflationary pressures from higher fuel prices.
Bank Indonesia (BI) will from June 15 set a maximum loan-to-value ratio for housing loans at 70 percent, a minimum downpayment for private car loans at 30 percent and for motorbikes at 25 percent, after previously leaving banks to decide these levels. Strong domestic demand and loan growth of around 25 percent in the past year, as a burgeoning middle class snaps up motorbikes often with minimal downpayments, helped drive the G20 economy to its fastest growth in 15 years in 2011, and so far shows few signs of slowing amid a weaker global economy.
"These prudential measures will tighten credit and rein in loan growth. BI may also see these as checks to ensure that inflation will remain under control, in view of impending fuel price increases in April," said Hak Bin Chua, economist at Bank of America Merrill Lynch in Singapore. The central bank left its benchmark interest rate on hold at a record low of 5.75 percent earlier this month, and a slim majority of analysts in a Reuters poll conducted after the rate decision expect it to hold rates all year. Some see it using other tools to tame prices since the government plans to hike fuel prices by a third next month. BI first flagged it was looking at regulating housing and auto loans in August last year to temper excessive loan growth in these sectors.
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