Bank Indonesia (BI) has issued a loan to value (LTV) relaxation policy or down payments for property loans and motor vehicle loans (KKB).

In its latest provision, the central bank relaxed the LTV ratio to a maximum of 100 percent for all property types (landed houses, flats, and shophouses/office houses) for banks that meet specific NPL / NPF criteria.

The provision also includes the elimination of the provision for gradual disbursement of indent property. BI also relaxed the requirements for KKB down payments to at least 0 percent for all types of new motorized vehicles.

This relaxation will be effective from March 1, 2021, to December 31, 2021. The hope is that this way, credit growth can recover quickly after a contraction.

There are several considerations from BI in issuing this latest policy.

Assistant Governor of the BI Macroprudential Policy Department, Juda Agung, said that the condition of credit supply, or banking liquidity, is very loose.

However, due to the economic pandemic and public consumption slowing down. The central bank is trying to boost credit demand, one of which is by easing LTV and down payments.

"We have an empirical study. Of course, the looser the LTV, the more it will encourage credit consumption. Particularly in related sectors such as property or automotive," he said in a video conference, Monday (22/2).

Naturally, according to Bank Indonesia's records as of January 2021, the growth of new home property loans grew by 3.6 percent on an annual basis or year on year (YoY). In detail, the majority of this growth was contributed by the housing loan (KPR) for housing types 22 to 70, which increased by 7.2% YoY.

Even so, for housing loan types above 70, it still contracted by 0.3% YoY. Meanwhile, for residential housing loans up to type 21, the contraction is quite deep by 15.6 percent YoY as of January 2021.

Then, housing loan for flat in total was still positive growth of 2.9% YoY. It mostly came from housing loans for flat types 22 to 70, which increased 5.1% YoY.

Even so, loans for flat-type housing above 70 and shop-houses still contracted by 0.3 percent YoY and 9.4 percent at the beginning of 2021.