After the recent death of a politician exposed the hazards of credit card debt, Bank Indonesia has begun studying options to prevent lenders from offering credit lines that are too big for consumers to handle.
“What we want is for only the most eligible to get credit cards, those who have the ability to pay,” central bank spokesman Difi A Djohansyah said on Friday.
Among the ideas floated were setting maximum credit limits based on a client’s income and raising the minimum age for card holders.
“We are reviewing whether the maximum limit should be 30 percent of monthly income [as in Malaysia],” he said. “The minimum age for credit-card holders, which is 21, needs to be reviewed as well.”
Bank Indonesia does not regulate credit limits, which are set by commercial banks. The lenders offer credit lines as they see fit, based on their assessment of a potential customer’s level of risk.
This is the latest move on the part of the central bank to protect consumers after politician Irzen Octa died on March 29 after meeting debt collectors working for Citibank Indonesia. Counting a massive amount of interest, Irzen had owed the lender over Rp 100 million ($11,500) in credit-card debt. Police have named five suspects over the death.
Difi said getting credit cards was relatively easy, with only Rp 30 million of annual income needed to secure a card. According to Jakarta Globe calculations and consumer interviews, that’s often enough for a bank to issue a card with a Rp 5 million limit.
Difi said the proposed limits on credit lines would only apply to entry-level cards. “Higher-limit credit cards are usually granted only after the consumer has a good record,” Difi said.
Bank Indonesia is also weighing the minimum age for card holders. “We want to review this because consumers’ maturity can be an early indication if they are able and willing to pay,’’ Difi said.
Central bank data show outstanding credit-card debt of Rp 33.2 trillion as of February, up from Rp 30.9 trillion in the year-earlier period. The non-performing loan ratio for credit cards had declined to 4.6 percent, or Rp 1.52 trillion, over that period. The banking sector’s net interest income was not available.
Citibank Indonesia has declined to disclose its NPL ratio for credit cards.
“What we want is for only the most eligible to get credit cards, those who have the ability to pay,” central bank spokesman Difi A Djohansyah said on Friday.
Among the ideas floated were setting maximum credit limits based on a client’s income and raising the minimum age for card holders.
“We are reviewing whether the maximum limit should be 30 percent of monthly income [as in Malaysia],” he said. “The minimum age for credit-card holders, which is 21, needs to be reviewed as well.”
Bank Indonesia does not regulate credit limits, which are set by commercial banks. The lenders offer credit lines as they see fit, based on their assessment of a potential customer’s level of risk.
This is the latest move on the part of the central bank to protect consumers after politician Irzen Octa died on March 29 after meeting debt collectors working for Citibank Indonesia. Counting a massive amount of interest, Irzen had owed the lender over Rp 100 million ($11,500) in credit-card debt. Police have named five suspects over the death.
Difi said getting credit cards was relatively easy, with only Rp 30 million of annual income needed to secure a card. According to Jakarta Globe calculations and consumer interviews, that’s often enough for a bank to issue a card with a Rp 5 million limit.
Difi said the proposed limits on credit lines would only apply to entry-level cards. “Higher-limit credit cards are usually granted only after the consumer has a good record,” Difi said.
Bank Indonesia is also weighing the minimum age for card holders. “We want to review this because consumers’ maturity can be an early indication if they are able and willing to pay,’’ Difi said.
Central bank data show outstanding credit-card debt of Rp 33.2 trillion as of February, up from Rp 30.9 trillion in the year-earlier period. The non-performing loan ratio for credit cards had declined to 4.6 percent, or Rp 1.52 trillion, over that period. The banking sector’s net interest income was not available.
Citibank Indonesia has declined to disclose its NPL ratio for credit cards.
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