Banking - Requirements for obtaining credit are becoming more lenient

Banking - Requirements for obtaining credit are becoming more lenient Although industrial credit generally experienced a slowdown, the disbursement of credit aimed at consumption remained stable. Moreover, there is potential for banks to relax the requirements for obtaining consumption credit, which could further boost it. As is known, consumer credit as of June 2025 experienced a growth of around 8.6% yoy, relatively stable from the previous month which grew 8.7% YoY. On the other hand, this growth is also higher compared to total credit which only grew 7.6% yoy in the same period. In line with that, the latest Banking Survey conducted by BI shows that the standards for Consumer Credit distribution are relatively looser in the second quarter of 2025 and are expected to continue in the following quarter. Where the Index Lending Standard (ILS) for consumer credit is at -0.06% from the previous quarter's level of 0.01%. "Tighter distribution policies include aspects such as risk premium credit, interest rates, and loan tenure, while more lenient credit distribution policies are found in the aspect of credit ceilings," the survey wrote. (Source : Kontan) Comment : The immediate impact of more lenient consumer credit requirements is largely positive for Indonesian banks, promising healthy loan growth and increased profitability in the short to medium term. However, the key challenge will be managing the associated credit risk effectively. Banks that can balance aggressive growth with prudent risk management (through appropriate pricing, tenure, and borrower assessment) will be best positioned to capitalize on this trend. Regulatory oversight from Bank Indonesia and OJK will be crucial to ensure the stability of the financial system amidst the growth expectation. Maintain OW stance for the sector (stock picks BBCA>BRIS>BMRI).