KOMPAS: CREDIT SEEN BECOMING TIGHT
KOMPAS 15 April 1976 (p. 1)
To the national private banking sector, if it cannot be called barely sufficient, the limit of credit expansion, which the government announced to take effect on 1 April 1976, still falls short of the requirements. The reason is that in 1975, national private banks had expanded to such an extent that they needed a more significant margin for their activity. This was one of the things a KOMPAS reporter learned yesterday from the banking circles. What is meant by expansion in national private banks in 1975 was, among other things, their merger activity. Since 1971, under government pressure, various national private banking institutions have formed mergers, and in 1975, more mergers were affected, followed by the opening of more branches, growing initiatives, and expanding operations. It is necessary to ease the credit expansion ceiling to sustain all these expanding activities.
Its facts have demonstrated that there exists a credit shortage. According to the data received, the credit expansion allowed by the Central Bank does not reach 50 percent of that of the previous fiscal year. It can even be said that the credit expansion permitted by the government for fiscal 1976/77 was only 25 percent of that for fiscal 1975/76. The balance sheets of the various banks published in the newspapers show that banks' assets have risen by about 50 percent. "Does it mean that with the application of government credit expansion policy for 1976/77, it is hoped that there will be a slackening of the banks' activities ?" is a snap-pish question asked in banking circles. It was added that for 1975/76, the government had increased credit expansion by 35 percent over 1974/75. Still, other circles pointed out that the credit limitation that has been decided on is not a fixed figure that cannot be changed during the fiscal year. Changes are always possible, depending on the economic situation and the nation's development. The Central Bank's 1974/75 budget illustrates. Initially, it had been decided that the banking credit increase for that year would be only 250 billion rupiahs. However, following reappraisals, which took place almost once every three months, the credit for fiscal 1974/75 rose to 400 billion rupiahs.
Long before, the governor of the Central Bank had stated that credit limit- tion as the principal policy instrument to check inflation might still be applied in 1976. That credit increase for 1976/77 would approximate 1975/76. At the end of January this year, the governor of the Central Bank announced that it would be difficult to expect a budget surplus for 1976. On the one hand, there is a wish to raise the foreign exchange reserves, but on the other hand, these reserves will swell liquid assets, the very element whose growth must be checked to hold off inflation. Banking activity is there, but it will be limited and curbed. In 1975, a new symptom developed in the form of a speedy rise in state enterprises and the granting of semi-fiscal credit. Credit expansion leeway for the other sectors in the country will be severely restricted because investments in establishing several state enterprises will still be underway in 1976.
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DISKLAIMER
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