Indonesia closes 38 banks

PRESS TRUST OF INDIA

JAKARTA, MAR 13: Indonesia plans to liquidate 38 banks and take over seven others as part of its efforts to reform the troubled banking industry. The announcement was made by the ministers in charge of the economy, finance and industry and the ceremony was attended by Hubert Neiss, Asia Pacific director of the International Monetary Fund. As part of the banking reforms process, commercial banks with a capital adequacy ratio of less than minus 25 per cent must be closed down and banks with ratio levels between minus 25 per cent and less than four per cent are eligible for a multi-billion dollar government recapitalisation programme.

However, these banks must provide acceptable business plans to meet minimum requirements, management and owners must be deemed fit and proper and should come up with at least 20 per cent of the recapitalisation funding in cash themselves, according to the Japanese news agency Kyodo. The programme is projected to cost 300 trillion rupiah ($ 33.9 billion).

The government needs tospend 17 trillion rupiah in 1999-2000 to pay interest on bonds.

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