KADIN CALLS ON BANKS TO CUT LENDING RATES SOON

Jakarta, July 7 (ANTARA) - The Indonesian Chamber of Commerce and Industry (Kadin) has called on banks to immediately lower their interest rates on credits in accordance with Bank Indonesia (BI/the central bank) recent action in cutting its key rate by 25 basis points to 6.75 percent.

"I appeal to banks to cut their lending rates soon so that investors will be able to borrow money at relatively lower interest rates," chairman of Kadin's foreign investment committee Chris Kanter said here on Tuesday.

He said the lending rates at present were still at the 13 percent level while a fair rate would be in the range of 10 to 11 percent.

Chris said the high bank lending rates at present posed difficulties to investors intending to borrow large sums of money.

"The central bank should urge banks to lower their lending rates which are still high," he said.

The chairman of Kadin's Permanent Committee for Internal Trade Affairs, Bambang Soesatyo, had earlier said BI's key rate cut by 25 basis points to 6.75 percent would receive little response from banks.

"I think banks will only give a small response to the BI Rate cut. Their response will be linked to political developments in the runup to the July 8, 2009 presidential election," he said.

Banks now even had no courage to extend credits or be inclined to delay opening credit lines to businesses needing working capital or investment funds. "It is not impossible that banks will raise their lending rates due to the increased weight of risks," he said.

But Bambang was convinced that banks' lending rates would eventually follow the BI rate cut after the political situation had become stable.

He said he was confused because the BI Rate no longer seemed to function as a reference to the financial world in the country. In January 2009, the BI Rate was cut to 8.75 percent and then to 8.25 percent in February. Again in March it was lowered to 7.75 percent, in April 7,50 percent, May 7.25 percent and June 7 percent. And it was cut again in July to 6.75 percent.

"But banks' lending rates have stubbornly remained at the 13 percent level," he said.***2***