Central bank warns banks against violating LTV regulation

Jakarta (ANTARA News) - Bank Indonesia said the Jakarta administrations plan to build low cost houses on bank credit without down payment needs legal basis.

"We warns banks to comply with the Central Bank regulation on loan to value (LTV ) ratio. They may not violate the macro-prudential policy," Governor of the Central Bank Agus Martowardojo said here on Friday.

The program of the Jakarta governor is possible but it needs special legal basis or official decision approved by the city council, Agus said.

Under a Bank Indonesia regulation , the down payment for houses purchase on credit is at least 15 percent of the total value of the houses.

Agus said legality is necessary to avoid risks caused by relaxation in financing.

He said the central government through the Public Works and Housing Ministry already has a number of programs offering facility for house credit similar to the program of the Jakarta city administration such as the program of Housing, Financing Liquidity Facility (FLLP), subsidy on the down payment.

Agus said banks may not violate the minimum limit set for down payment for houses purchased on bank credit as ruled by the Central Bank regulation No. 18/16/PBI/2016 on Loan to Value ratio.

The regulation has to be complied with to meet the macro-prudential principles to mitigate the risk of non performing credit, he said.

On January 18, 2018 Jakarta Governor Anies Baswedan inaugurated the groundbreaking marking the start of building low cost houses without down payment to be offered to low income Jakartas people.

Anies was seeking to meet his political pledges before his election as new governor of the capital city.

The program has raised controversy with critics accusing Anies of choosing to meet his political pledges even if the pledges are not feasible.

Source: ANTARA News

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