Financial Services Authority Regulation Number 1 of 2024 Concerning the Asset Quality of Rural Economic Banks

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 1 OF 2024
CONCERNING
ASSET QUALITY
OF RURAL ECONOMIC BANKS
BY THE GRACE OF GOD THE ALMIGHTY,
THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that in order to support a healthy and highly competitive rural economic bank industry, rural economic banks in conducting their business activities, particularly asset management, must always adhere to prudential principles and risk management; b. that in order to implement the provisions of Article 12A and Article 15 of Law Number 7 of 1992 concerning Banking as amended several times, lastly with Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector;
c. that in line with the latest developments in financial accounting standards, rural economic banks are required to present accurate, comprehensive financial reports that reflect the performance of rural economic banks in accordance with financial accounting standards;
d. that based on the considerations as referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation concerning the Asset Quality of Rural Economic Banks;

Recalling:

Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended several times, lastly with Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2023 Number 4, Supplement to the State Gazette of the Republic of Indonesia Number 6845);
Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253) as amended with Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2023 Number 4, Supplement to the State Gazette of the Republic of Indonesia Number 6845);

DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING ASSET QUALITY OF RURAL ECONOMIC BANKS.

CHAPTER I
GENERAL PROVISIONS

Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

Rural Economic Bank, hereinafter abbreviated as BPR, is a conventional bank type that does not provide services in giro circulation directly in its activities.
Assets are productive assets and non-productive assets.
Productive Assets are the provision of BPR funds in Rupiah currency to obtain income, in the form of credits, securities, placements in other banks, and capital participation.
Placement in Other Banks is the placement of BPR funds in other banks in the form of current accounts, savings, deposits, deposit certificates, credits granted, and other similar fund placements.
Securities are securities issued by Bank Indonesia, the Government, or Local Governments.
Credit is the provision of funds or claims that can be equated with them, based on an agreement or consensus of borrowing between the BPR and the borrower, which obligates the borrower to repay their debt after a certain period with the provision of interest, including the transfer of receivables.
Capital Participation is the investment of BPR funds in the form of shares in institutions supporting BPR, with requirements in accordance with applicable legislation.
Non-Productive Assets are collateral taken over, abandoned properties, and BPR claims arising from the counterparty failing to fulfill obligations to the BPR.
Collateral Taken Over, hereinafter abbreviated as AYDA, is assets obtained by the BPR, either partially or wholly, through purchase via auction or outside of auction based on voluntary surrender by the collateral owner or based on a power of attorney to sell outside of auction from the collateral owner, in the event the debtor fails to fulfill obligations to the BPR, with the provision that collateral purchased must be liquidated as soon as possible.
Abandoned Property is fixed assets in the form of property owned by the BPR but not used for BPR business activities related to BPR operations.
Asset Quality Assessment Provision, hereinafter abbreviated as PPKA, is a provision calculated as a certain percentage based on Asset quality for the purpose of calculating the minimum capital adequacy requirement for BPR.
Impairment Loss Reserve, hereinafter abbreviated as CKPN, is a provision formed for the impairment of financial instruments in accordance with financial accounting standards.
Minimum Capital Adequacy Requirement, hereinafter abbreviated as KPMM, is the ratio of capital to risk-weighted assets that must be provided by BPR in accordance with the Financial Services Authority Regulation concerning minimum capital adequacy requirements and minimum core capital fulfillment for rural credit banks.
Board of Directors is the board of directors for BPRs in the form of limited liability companies, regional public enterprises, regional joint-stock companies, regional enterprises, or managers for BPRs in the form of cooperative legal entities.
Board of Commissioners is the board of commissioners for BPRs in the form of limited liability companies, commissioners for BPRs in the form of regional joint-stock company legal entities, supervisory boards for BPRs in the form of regional public enterprise and regional enterprise legal entities, and supervisors for BPRs in the form of cooperative legal entities.
Customer Debtor, hereinafter referred to as Debtor, is a customer who obtains Credit facilities or equivalents based on an agreement between the BPR and the respective customer.
Credit Restructuring is an improvement effort carried out by the BPR in its lending activities towards a Debtor experiencing difficulties in fulfilling their obligations.

CHAPTER II
ASSET QUALITY

First Section
General

Article 2
(1) BPRs are required to manage Assets based on prudential principles.
(2) To implement the prudential principle as referred to in paragraph (1), the BPR Board of Directors is required to assess, monitor, and take necessary steps:
a. to ensure that the quality of Productive Assets remains good; and b. for the resolution of Non-Productive Assets.

Article 3
(1) BPRs are required to assess and determine the quality of Productive Assets.
(2) In the event of a discrepancy in the determination of Productive Asset quality between the BPR and the Financial Services Authority, the Productive Asset quality determined by the Financial Services Authority shall apply. (3) BPRs are required to adjust the quality of Productive Assets in accordance with that determined by the Financial Services Authority as referred to in paragraph (2) in reports submitted to the Financial Services Authority in accordance with the Financial Services Authority Regulation concerning reporting by rural credit banks and Islamic rural financing banks through the Financial Services Authority reporting system.

Article 4
(1) BPRs are required to determine the same quality for all identical Productive Assets used to finance:
a. 1 (one) Debtor; or b. 1 (one) project or the same business.
(2) The determination of Productive Asset quality as referred to in paragraph (1) must follow the lowest Productive Asset quality.
(3) The provisions as referred to in paragraph (2) may be exempted for Productive Assets determined based on different assessment factors.

Article 5
(1) BPRs are required to determine the same quality for Productive Assets provided by more than 1 (one) BPR used to finance:
a. 1 (one) Debtor; or b. 1 (one) project or the same business.
(2) The provisions as referred to in paragraph (1) apply to:
a. Productive Assets provided by each BPR with an amount exceeding Rp1,000,000,000.00 (one billion Rupiah) to 1 (one) debtor or 1 (one) project or the same business; b. Productive Assets provided by BPRs with an amount exceeding Rp500,000,000.00 (five hundred million Rupiah) up to Rp1,000,000,000.00 (one billion Rupiah) to 1 (one) debtor who is among the 25 (twenty-five) largest debtors of that BPR, and Productive Assets provided by other BPRs to that debtor exceeding Rp1,000,000,000.00 (one billion Rupiah); and/or
c. Productive Assets provided based on a Joint Credit agreement to 1 (one) debtor or 1 (one) project or the same business.
(3) In the event of differences in Productive Asset quality as referred to in paragraph (1) and paragraph (2), the quality determined by each BPR for Productive Assets must follow the lowest quality. (4) The provisions as referred to in paragraph (3) may be exempted for Productive Assets determined based on different assessment factors. (5) BPRs are required to evaluate and adjust if there are changes to the quality determination as referred to in paragraph (1) at the latest for the end-of-position dates of March, June, September, and December.

Article 6
(1) BPRs may determine different qualities for Productive Assets provided to Debtors as referred to in Article 4 paragraph (1) or Article 5 paragraph (1) if the Debtor meets at least the following requirements:
a. The Debtor has several:

projects;
businesses; or
funding sources,
that are different, which serve as the source for principal and/or interest payments; and b. there is a clear separation of cash flows from each project, business, or funding source, which serves as the source for principal and/or interest payments. (2) BPRs that determine different qualities for Productive Assets provided to 1 (one) Debtor as referred to in paragraph (1) are required to document a list containing the Debtor's name along with details including the financed project or business, different funding sources, the ceiling and outstanding balance of Productive Assets, the quality determined by the BPR, the quality determined by other BPRs, a statement letter from the debtor, and copies of credit agreements from other BPRs, and the reasons for determining different qualities. (3) BPRs are required to submit a report on quality differences in the form of a list of Debtors along with the details as referred to in paragraph (2) for the end-of-position dates of March, June, September, and December. (4) The report on productive asset quality differences as referred to in paragraph (3) is submitted to the Financial Services Authority in accordance with the Financial Services Authority Regulation concerning reporting by rural credit banks and Islamic rural financing banks through the Financial Services Authority reporting system, using the report format contained in Appendix I, which is an integral part of this Financial Services Authority Regulation. (5) In the event that, based on the results of Financial Services Authority supervision, it is known that the determination made by the BPR does not meet the requirements as referred to in paragraph (1), the BPR makes the determination in accordance with the provisions as referred to in Article 4 paragraph (1) letter a or Article 5 paragraph (1) letter a.

Second Section
Credits

Article 7
(1) The quality of Productive Assets in the form of Credits provided by each BPR to 1 (one) Debtor or 1 (one) project or business is assessed based on assessment factors:
a. business prospects; b. Debtor performance; and
c. repayment capacity.
(2) The quality of Productive Assets in the form of Credits provided by each BPR to 1 (one) Debtor or 1 (one) project or business with an amount of at most Rp5,000,000,000.00 (five billion Rupiah) may be assessed based on the timeliness of principal and/or interest payments. (3) The determination of Productive Asset quality in the form of Credits as referred to in paragraph (1) and paragraph (2) is contained in Appendix II, which is an integral part of this Financial Services Authority Regulation.

Article 8
(1) Assessment of business prospects as referred to in Article 7 paragraph (1) letter a includes assessment of components:
a. business growth potential; b. market conditions and the Debtor's position in competition;
c. management quality and labor issues;
d. support from owners, groups, or affiliates; and e. efforts made by the Debtor to maintain the environment.
(2) Assessment of Debtor performance as referred to in Article 7 paragraph (1) letter b includes assessment of components:
a. profitability; b. capital structure; and
c. cash flow.
(3) Assessment of repayment capacity as referred to in Article 7 paragraph (1) letter c includes assessment of components:
a. timeliness of principal and/or interest payments; b. availability and accuracy of Debtor financial information;
c. completeness of Credit documentation;
d. compliance with Credit agreements; e. suitability of fund usage; and f. fairness of the source of obligation payments.

Article 9
The assessment of Productive Asset quality in the form of Credits as referred to in Article 7 paragraph (1) and Article 8 is conducted by considering:
a. the significance and materiality of each assessment factor and component; and b. the relevance of assessment factors and components to the respective Debtor.

Article 10
In the event of conditions causing the Debtor to be unable to repay principal and/or interest in accordance with the Credit agreement with the BPR, the Financial Services Authority has the authority to downgrade the quality of Productive Assets determined by the BPR based on assessment factors as referred to in Article 7 paragraph (2).

Article 11
Based on the assessment as referred to in Article 7, the quality of Productive Assets in the form of Credits is determined as:
a. performing; b. special attention;
c. doubtful;
d. questionable; or e. non-performing.

Article 12
In the event of deviations in Credit granting, BPRs are required to downgrade the quality of Productive Assets in the form of Credits to non-performing.

Article 13
(1) BPRs granting Credits with a grace period for payment shall calculate overdue principal and/or interest installments after the payment grace period has ended.
(2) The final deadline for Credits with a payment grace period as referred to in paragraph (1) is established in the Credit agreement.

Third Section
Securities

Article 14
(1) BPRs may only hold Securities issued by Bank Indonesia, the Government, and/or Local Governments.
(2) The quality of Productive Assets in the form of Securities issued by Bank Indonesia or the Government is determined as performing.
(3) The quality of Productive Assets in the form of Securities issued by Local Governments is determined as:
a. performing; b. doubtful; or
c. non-performing.
(4) The determination of Productive Asset quality in the form of Securities as referred to in paragraph (3) is contained in Appendix II, which is an integral part of this Financial Services Authority Regulation.

Fourth Section
Placement in Other Banks

Article 15
(1) The quality of Productive Assets in the form of Placement in Other Banks is determined as:
a. performing; b. doubtful; or
c. non-performing.
(2) The determination of Productive Asset quality in the form of Placement in Other Banks as referred to in paragraph (1) is contained in Appendix II, which is an integral part of this Financial Services Authority Regulation.

Fifth Section
Capital Participation

Article 16
(1) Capital Participation is measured and/or recorded using:
a. acquisition cost; or b. the equity method, with reference to financial accounting standards.
(2) The quality of Productive Assets in the form of Capital Participation measured and/or recorded using acquisition cost as referred to in paragraph (1) letter a is determined as:
a. performing; b. doubtful;
c. questionable; or
d. non-performing.
(3) The quality of Productive Assets in the form of Capital Participation measured and/or recorded using the equity method as referred to in paragraph (1) letter b is determined as performing. (4) The determination of Productive Asset quality in the form of Capital Participation as referred to in paragraph (2) is contained in Appendix II, which is an integral part of this Financial Services Authority Regulation.

Sixth Section
Productive Assets Secured by Cash Collateral

Article 17
(1) The portion of Productive Assets secured by cash collateral is determined to have performing quality.
(2) Cash collateral consists of:
a. savings, deposits, and/or precious metals; and/or b. Securities issued by Bank Indonesia or the Government.
(3) Cash collateral as referred to in paragraph (2) must meet the following requirements:
a. the collateral is blocked and accompanied by a power of attorney for disbursement from the collateral owner for the benefit of the BPR receiving the collateral, including partial disbursement to pay overdue principal and/or interest installments; b. the blocking period as referred to in letter a is at least equal to the term of the Productive Asset;
c. it has strong legal binding as collateral, free from all other obligations, free from disputes, not pledged to other parties, including having a clear guarantee purpose; and
d. proof of collateral ownership consists of:

savings and deposits; and/or
proof of ownership and physical precious metals,
stored at the providing BPR.

Seventh Section
Sanctions

Article 18
(1) BPRs that violate the provisions as referred to in Article 2, Article 3 paragraph (1), paragraph (3), Article 4 paragraph (1), paragraph (2), Article 5 paragraph (1), paragraph (3), paragraph (5), Article 6 paragraph (2), paragraph (3), and/or Article 12, shall be subject to administrative sanctions in the form of written reprimands. (2) In the event that a BPR has been subject to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 2, Article 3 paragraph (1), paragraph (3), Article 4 paragraph (1), paragraph (2), Article 5 paragraph (1), paragraph (3), paragraph (5), Article 6 paragraph (2), paragraph (3), and/or Article 12, the BPR shall be subject to administrative sanctions in the form of:
a. downgrade of the BPR's health level; and/or b. temporary cessation of some business activities.
(3) In the event that a BPR has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 2, Article 3 paragraph (1), paragraph (3), Article 4 paragraph (1), paragraph (2), Article 5 paragraph (1), paragraph (3), paragraph (5), Article 6 paragraph (2), paragraph (3), and/or Article 12, the principal parties of the BPR may be subject to administrative sanctions in the form of prohibition from acting as principal parties in accordance with the Financial Services Authority Regulation concerning re-evaluation for principal parties of financial service institutions.

CHAPTER III
PPKA AND CKPN

First Section
PPKA

Article 19
(1) BPRs are required to calculate PPKA in the form of general PPKA and specific PPKA for each Productive Asset.
(2) General PPKA as referred to in paragraph (1) is determined at least 0.5% (zero point five percent) of Productive Assets with performing quality.
(3) Specific PPKA as referred to in paragraph (1) is determined at least:
a. 3% (three percent) of Productive Assets with special attention quality after deducting collateral value; b. 10% (ten percent) of Productive Assets with doubtful quality after deducting collateral value;
c. 50% (fifty percent) of Productive Assets with questionable quality after deducting collateral value; and/or
d. 100% (one hundred percent) of Productive Assets with non-performing quality after deducting collateral value.
(4) The calculation of general PPKA as referred to in paragraph (2) is exempted for Productive Assets in the form of:
a. Securities issued by Bank Indonesia or the Government; and b. portions of Productive Assets secured by cash collateral as referred to in Article 17.

Article 20
(1) The collateral value calculated as a deduction in the calculation of specific PPKA as referred to in Article 19 paragraph (3) is determined at most:
a. 85% (eighty-five percent) of market value for collateral in the form of jewelry gold; b. 80% (eighty percent) of the value of mortgage rights or fiduciary rights for collateral in the form of land and/or buildings with certificates encumbered by mortgage rights or fiduciary rights;
c. 70% (seventy percent) of collateral value in the form of warehouse receipts whose assessment was conducted within the last 12 (twelve) months and in accordance with applicable legislation concerning warehouse receipts;
d. 60% (sixty percent) of the Taxable Object Value or market value based on assessment by an independent appraiser for collateral in the form of land and/or buildings with certificates not encumbered by mortgage rights or fiduciary rights; e. 50% (fifty percent) of the Taxable Object Value based on the Taxable Tax Notification Letter or the latest Taxable Object Value notification letter from the competent authority, or from market value based on assessment by an independent appraiser or competent authority, for collateral in the form of land and/or buildings with ownership in the form of customary land acknowledgment letters; f. 50% (fifty percent) of market price, rental price, or transfer price, for collateral in the form of business premises accompanied by proof of ownership, usage permit letters, or land usage rights issued by competent authorities and accompanied by a power of attorney to sell or transfer rights made or notarized by a notary or made by other competent officials; g. 50% (fifty percent) of the value of mortgages or fiduciary rights in the form of motor vehicles, ships, motorboats, heavy equipment, and/or machinery that are integral parts of the land, accompanied by proof of ownership and where mortgage or fiduciary rights have been established in accordance with applicable legislation; h. 50% (fifty percent) of collateral value in the form of warehouse receipts whose assessment was conducted more than 12 (twelve) months up to 18 (eighteen) months ago and in accordance with applicable legislation concerning warehouse receipts;
i. 50% (fifty percent) for portions of Credits guaranteed by State-Owned Enterprises (BUMN)/Regional-Owned Enterprises (BUMD) conducting business as Credit guarantors meeting criteria in accordance with the Financial Services Authority Regulation concerning minimum capital adequacy requirements and minimum core capital fulfillment for rural credit banks;
j. 30% (thirty percent) of collateral value in the form of warehouse receipts whose assessment was conducted more than 18 (eighteen) months but not exceeding 24 (twenty-four) months ago and in accordance with applicable legislation concerning warehouse receipts; or k. 20% (twenty percent) of collateral value other than collateral as referred to in letters a through j, assessed within the last 1 (one) year by an independent appraiser using assessment methods as regulated by applicable appraisal standards. (2) Collateral other than as referred to in paragraph (1) is not calculated as a deduction in the formation of PPKA calculations. (3) The collateral value calculated as a deduction in the formation of PPKA calculations for Credits with non-performing quality for collateral as referred to in paragraph (1) letters b, d, e, and f:
a. is determined at most 50% (fifty percent) of the collateral value calculated after a period of 2 (two) years up to 4 (four) years from the determination of Credit quality becoming non-performing; and b. cannot be calculated as a deduction factor in the formation of PPKA after a period of 4 (four) years from the determination of Credit quality becoming non-performing.

(4) The provisions referred to in paragraph (3) may be exempted if the collateral meets the following requirements:
a. the collateral consisting of land and/or buildings has a certificate encumbered by a mortgage right or fiduciary security right; b. the collateral has been appraised by an independent appraiser within the last 1 (one) year; and
c. the value of the mortgage right covers at least the entire amount of the debtor's obligations to the BPR.

(5) The value of collateral calculated as a reduction in the calculation of PPKA for Credit with non-performing quality for collateral as referred to in paragraph (1) letter g:
a. is determined at a maximum of 50% (fifty percent) of the value of the collateral calculated after a period of 1 (one) year up to 2 (two) years from the determination of the Credit quality as non-performing; and b. cannot be calculated as a reduction factor in the formation of PPKA after a period of 2 (two) years from the determination of the Credit quality as non-performing.

(6) The Financial Services Authority may determine a different period from the period as referred to in paragraph (3) based on an analysis of the economic conditions of the local area and its surroundings.

Article 21
(1) BPR is required to conduct periodic assessments of collateral to determine its economic value.
(2) Collateral shall not be calculated as a reduction in the calculation of PPKA if:
a. no assessment has been conducted by the BPR as referred to in paragraph (1); b. its existence cannot be ascertained;
c. it cannot be executed; and/or
d. the collateral belongs to a third party without consent from the owner of the collateral.

(3) BPR is required to adjust the value of collateral as a reduction in the formation of PPKA calculations if there is a significant decrease in the value of the collateral.

Article 22
(1) In the event that BPR does not comply with the provisions as referred to in Article 20 and Article 21, the Financial Services Authority has the authority to recalculate the value of collateral that has been calculated as a reduction in the calculation of PPKA. (2) BPR is required to adjust the PPKA calculation in accordance with the calculation determined by the Financial Services Authority as referred to in paragraph (1) in the report submitted to the Financial Services Authority referring to the Financial Services Authority's provisions regarding monthly BPR reports.

Article 23
Placements in Other Banks that meet the criteria for guarantee by the Deposit Insurance Agency may be used as a reduction factor in the formation of general and specific PPKA calculations.

Article 24
BPR is required to form PPKA with the same mechanism as the PPKA calculation as referred to in Article 19 through Article 23.

Article 25
BPR is required to form a reserve of 100% (one hundred percent) over BPR claims arising from counterparties failing to fulfill their obligations to the BPR.

Second Section
CKPN

Article 26
BPR is required to form CKPN in accordance with financial accounting standards.

Article 27
(1) In calculating the KPMM ratio, BPR is required to consider the CKPN formed and PPKA over Productive Assets.
(2) In the event that the calculation result of the formed CKPN is smaller than the PPKA over Productive Assets, BPR is required to consider the difference between the calculation result of the formed CKPN and the PPKA over Productive Assets as a reduction in capital in the calculation of the KPMM ratio. (3) In the event that the calculation result of the formed CKPN is equal to or greater than the PPKA over Productive Assets, BPR does not need to consider the PPKA over Productive Assets in the calculation of the KPMM ratio.

Third Section
Sanctions

Article 28
(1) BPR that violates the provisions as referred to in Article 19 paragraph (1), Article 21 paragraph (1), paragraph (3), Article 22 paragraph (2), Article 24, Article 25, Article 26, Article 27 paragraph (1), and/or paragraph (2), shall be subject to administrative sanctions in the form of a written warning. (2) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 19 paragraph (1), Article 21 paragraph (1), paragraph (3), Article 22 paragraph (2), Article 24, Article 25, Article 26, Article 27 paragraph (1), and/or paragraph (2), BPR shall be subject to administrative sanctions in the form of:
a. a decrease in the BPR's health level; and/or b. temporary suspension of some business activities.
(3) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 19 paragraph (1), Article 21 paragraph (1), paragraph (3), Article 22 paragraph (2), Article 24, Article 25, Article 26, Article 27 paragraph (1), and/or paragraph (2), the principal party of the BPR may be subject to administrative sanctions in the form of a prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions.

CHAPTER IV
CREDIT RESTRUCTURING

First Section
General

Article 29
(1) BPR may conduct Credit Restructuring against a Debtor who, in the BPR's assessment, meets the following criteria:
a. the Debtor experiences difficulties in paying the principal and/or interest of the Credit; and b. the Debtor has a good business prospect and is assessed to be able to fulfill obligations after Credit Restructuring is conducted. (2) Credit Restructuring as referred to in paragraph (1) is conducted through:
a. rescheduling; b. reconditioning; and/or
c. restructuring.
(3) BPR is required to incorporate Credit Restructuring conducted into the Credit agreement.
(4) The Credit agreement as referred to in paragraph (3) must refer to the previous Credit agreement.

Article 30
(1) BPR is prohibited from conducting Credit Restructuring for the purpose of avoiding:
a. a decrease in Credit quality; b. an increase in PPKA formation; and/or
c. the cessation of accrual-based interest income recognition,
without considering the Debtor criteria as referred to in Article 29.
(2) In conducting Credit Restructuring, BPR is required to observe the following principles:
a. objectivity; b. independence;
c. avoidance of conflicts of interest; and
d. fairness.

Article 31
(1) The Credit Quality of Credit that undergoes Credit Restructuring as referred to in Article 29 is determined as:
a. at most Doubtful for Credit whose quality was previously classified as Doubtful or Non-Performing before Credit Restructuring was conducted; or b. unchanged, for Credit whose quality was previously classified as Performing, Special Mention, or Doubtful before Credit Restructuring was conducted. (2) The determination of Credit Quality as referred to in paragraph (1) may become:
a. Performing, in the event that there are no overdue principal and/or interest installments for 3 (three) consecutive payment periods; or b. the same as the Credit quality before Credit Restructuring was conducted, in the event that the Debtor cannot fulfill the conditions as referred to in letter a. (3) The determination of Credit quality as referred to in paragraph (2) is subsequently determined based on the assessment as referred to in Article 7.

Article 32
BPR is required to apply accounting treatment for Credit Restructuring in accordance with financial accounting standards and accounting guidelines for BPR.

Article 33
The Credit Quality of Credit restructured with the provision of a payment grace period as referred to in Article 13 paragraph (1) is determined as:
a. during the payment grace period, the Credit quality follows the quality determination before Credit Restructuring was conducted; and b. after the payment grace period ends, the Credit quality follows the quality determination as referred to in Article 31.

Article 34
The Financial Services Authority may make corrections to the determination of Credit quality for restructured Credit, PPKA formation, and interest income recognized on an accrual basis if Credit Restructuring is not conducted in accordance with this Financial Services Authority Regulation, which includes:
a. based on the Financial Services Authority's assessment, Credit Restructuring is conducted for the purpose as referred to in Article 30 paragraph (1); b. the Debtor does not execute the Credit agreement as referred to in Article 29 paragraph (3);
c. Credit Restructuring is conducted repeatedly with the purpose of improving Credit quality without considering the Debtor's business prospects; and/or
d. Credit Restructuring is not supported by complete documents and adequate analysis regarding the Debtor's repayment ability and business prospects.

Second Section
Sanctions

Article 35
(1) BPR that violates the provisions as referred to in Article 29 paragraph (3), paragraph (4), Article 30 paragraph (1), and/or Article 32, shall be subject to administrative sanctions in the form of a written warning. (2) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 29 paragraph (3), paragraph (4), Article 30 paragraph (1), and/or Article 32, BPR shall be subject to administrative sanctions in the form of:
a. a decrease in the BPR's health level; and/or b. temporary suspension of some business activities.
(3) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 29 paragraph (3), paragraph (4), Article 30 paragraph (1), and/or Article 32, the principal party of the BPR may be subject to administrative sanctions in the form of a prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions.

CHAPTER V
IDLE PROPERTY

Article 36
(1) BPR is required to identify and determine Idle Property that it owns.
(2) Idle Property as referred to in paragraph (1) refers to property and/or part of property that has not been used for business activities related to BPR operations for the majority of the time for 3 (three) years since the property was owned. (3) The determination of Idle Property as referred to in paragraph (1) must be approved by the Board of Directors and documented. (4) In the event of a difference in the determination of BPR's Idle Property between the BPR and the Financial Services Authority, the determination of Idle Property established by the Financial Services Authority shall prevail.

Article 37
(1) BPR is required to take settlement efforts for Idle Property that it owns.
(2) BPR is required to document the settlement efforts for Idle Property as referred to in paragraph (1).
(3) BPR is required to consider Idle Property recorded in the financial position report as a reduction factor for BPR's core capital in the KPMM calculation amounting to:
a. 15% (fifteen percent) of the value of Idle Property owned for more than 1 (one) year up to 3 (three) years since it was designated as Idle Property; b. 50% (fifty percent) of the value of Idle Property owned for more than 3 (three) years up to 5 (five) years since it was designated as Idle Property; or
c. 100% (one hundred percent) of the value of Idle Property owned for more than 5 (five) years since it was designated as Idle Property.
(4) The Financial Services Authority may determine a different period from the period as referred to in paragraph (3) based on an analysis of the economic conditions of the local area and its surroundings.

Article 38
(1) BPR that violates the provisions as referred to in Article 36 paragraph (1), paragraph (3), Article 37 paragraph (1), paragraph (2), and/or paragraph (3), shall be subject to administrative sanctions in the form of a written warning. (2) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 36 paragraph (1), paragraph (3), Article 37 paragraph (1), paragraph (2), and/or paragraph (3), BPR shall be subject to administrative sanctions in the form of:
a. a decrease in the BPR's health level; and/or b. temporary suspension of some business activities.
(3) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 36 paragraph (1), paragraph (3), Article 37 paragraph (1), paragraph (2), and/or paragraph (3), the principal party of the BPR may be subject to administrative sanctions in the form of a prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions.

CHAPTER VI
AYDA

Article 39
(1) BPR is required to determine the quality of Productive Assets as non-performing before conducting the takeover of AYDA.
(2) To conduct the takeover of AYDA as referred to in paragraph (1), BPR is required to conduct an assessment of each collateral.
(3) The assessment of each collateral as referred to in paragraph (2) is conducted through:
a. auction, conducted in accordance with the provisions of legislation regarding the implementation of auctions; b. outside of auction, must be conducted by:

an independent appraiser for collateral with a value of at least Rp1,000,000,000.00 (one billion rupiah); and
an internal appraiser for collateral with a value of less than Rp1,000,000,000.00 (one billion rupiah).
(4) BPR is required to conduct periodic re-assessments of AYDA in accordance with financial accounting standards and BPR accounting guidelines.
(5) Re-assessment as referred to in paragraph (4) must be conducted by:
a. an independent appraiser for AYDA with a value of at least Rp1,000,000,000.00 (one billion rupiah); and b. an internal appraiser for AYDA with a value of less than Rp1,000,000,000.00 (one billion rupiah). (6) In the event that the value of AYDA decreases, BPR is required to recognize the decrease as a loss. (7) In the event that the value of AYDA increases, BPR is prohibited from recognizing the increase as income. (8) In conducting the takeover of AYDA for Credit settlement, BPR applies:
a. the principles of prudence and risk management; and b. the principle of consumer protection in accordance with the provisions of legislation regarding consumer and community protection in the financial service sector.

Article 40
(1) The takeover of AYDA as referred to in Article 39 paragraph (1) is temporary and must be liquidated as soon as possible calculated from the takeover of AYDA by the BPR.
(2) BPR is required to consider AYDA for the type of collateral as referred to in Article 20 paragraph (1) letter b, letter d, letter e, and letter f recorded in the financial position report as a reduction factor for BPR's core capital in the KPMM ratio calculation amounting to:
a. 15% (fifteen percent) of the value of AYDA for AYDA owned for more than 1 (one) year up to 3 (three) years; b. 50% (fifty percent) of the value of AYDA for AYDA owned for more than 3 (three) years up to 5 (five) years; and/or
c. 100% (one hundred percent) of the value of AYDA for AYDA owned for more than 5 (five) years.
(3) BPR is required to consider AYDA for types of collateral other than those referred to in Article 20 paragraph (1) letter b, letter d, letter e, and letter f recorded in the financial position report as a reduction factor for BPR's core capital in the KPMM ratio calculation amounting to:
a. 50% (fifty percent) of the value of AYDA for AYDA owned for more than 1 (one) year up to 2 (two) years; and/or b. 100% (one hundred percent) of the value of AYDA for AYDA owned for more than 2 (two) years. (4) BPR is required to document the efforts to liquidate AYDA as referred to in paragraph (1). (5) BPR is required to apply accounting treatment for the takeover of AYDA in accordance with financial accounting standards and accounting guidelines for BPR. (6) The Financial Services Authority may determine a different period from the period as referred to in paragraph (2) based on an analysis of the economic conditions of the local area and its surroundings.

Article 41
(1) BPR that violates the provisions as referred to in Article 39 paragraph (1), paragraph (2), paragraph (3) letter b, paragraph (4), paragraph (5), paragraph (6), paragraph (7), Article 40 paragraph (1), paragraph (2), paragraph (3), paragraph (4), and/or paragraph (5), shall be subject to administrative sanctions in the form of a written warning. (2) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 39 paragraph (1), paragraph (2), paragraph (3) letter b, paragraph (4), paragraph (5), paragraph (6), paragraph (7), Article 40 paragraph (1), paragraph (2), paragraph (3), paragraph (4), and/or paragraph (5), BPR shall be subject to administrative sanctions in the form of:
a. a decrease in the BPR's health level; and/or b. temporary suspension of some business activities.
(3) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 39 paragraph (1), paragraph (2), paragraph (3) letter b, paragraph (4), paragraph (5), paragraph (6), paragraph (7), Article 40 paragraph (1), paragraph (2), paragraph (3), paragraph (4), and/or paragraph (5), the principal party of the BPR may be subject to administrative sanctions in the form of a prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions.

CHAPTER VII
WRITE-OFF

Article 42
(1) Write-off is prohibited except for Productive Assets that have non-performing quality and are supported by the formation of a reserve of 100% (one hundred percent).
(2) Write-off is prohibited for part of the fund provision.

Article 43
(1) BPR is prohibited from conducting write-off as referred to in Article 42 unless the BPR has made efforts to recover the Productive Assets provided.
(2) BPR is required to document the efforts to recover the Productive Assets provided as referred to in paragraph (1) and the basis for the consideration of implementing the write-off. (3) BPR is required to administer data and information regarding Productive Assets that have undergone write-off.

Article 44
(1) BPR that violates the provisions as referred to in Article 42 and/or Article 43 shall be subject to administrative sanctions in the form of a written warning.
(2) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 42 and/or Article 43, BPR shall be subject to administrative sanctions in the form of:
a. a decrease in the BPR's health level; and/or b. temporary suspension of some business activities.
(3) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 42 and/or Article 43, the principal party of the BPR may be subject to administrative sanctions in the form of a prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions.

CHAPTER VIII
CREDIT POLICY AND CREDIT PROCEDURES

Article 45
(1) For the provision of funds in the form of Credit, BPR is required to:
a. have and apply written credit policy and credit procedures referring to the BPR Credit Policy Guidelines contained in Appendix III which is an integral part of this Financial Services Authority Regulation; and b. conduct periodic evaluation of credit policy and credit procedures in accordance with the BPR's needs. (2) The credit policy as referred to in paragraph (1) must contain at least:
a. the principle of prudence in lending; b. credit organization and management;
c. credit approval policy;
d. credit documentation and administration; e. credit supervision; f. handling of problematic Credit; and g. implementation of periodic evaluation over the credit policy and credit procedures as referred to in paragraph (1). (3) The credit policy as referred to in paragraph (1) must be approved by the Board of Commissioners. (4) The credit procedures as referred to in paragraph (1) must be approved by the Board of Directors.

Article 46
(1) The Board of Commissioners is required to conduct effective supervision over the implementation of the credit policy as referred to in Article 45 paragraph (1).
(2) The effective supervision conducted by the Board of Commissioners as referred to in paragraph (1) must include at least:
a. reviewing and approving the BPR's credit policy proposed by the Board of Directors; b. supervising the Board of Directors' implementation of responsibilities regarding the application of credit policy and credit procedures; and
c. reporting the results of implementation and supervision over the implementation of credit policy and credit procedures by the Board of Directors to the Financial Services Authority in the BPR business plan supervision report in accordance with the Financial Services Authority Regulation regarding business plans of people's economic banks and sharia people's economic financing banks.
(3) The supervision result report as referred to in paragraph (2) letter c must contain at least:
a. the application of the principle of prudence in granting Credit consisting of:

assessment of the implementation of credit policy and credit procedures;
fulfillment of PPKA;
maximum limit for granting Credit;
Credit to related parties, Group Debtors, and/or specific Large Debtors; and
handling of problematic Credit, consisting of Credit Restructuring, settlement through the takeover of AYDA or sale of collateral, and/or write-off;
b. assessment of the implementation of handling problematic Credit accompanied by an explanation regarding the causes of problematic Credit and efforts that have been made to resolve problematic Credit; and
c. recommendations and suggestions from the Board of Commissioners regarding the implementation of the credit policy.

Article 47
(1) BPR that violates the provisions as referred to in Article 45, Article 46 paragraph (1), and/or paragraph (3), shall be subject to administrative sanctions in the form of a written warning. (2) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 45, Article 46 paragraph (1), and/or paragraph (3), BPR shall be subject to administrative sanctions in the form of:
a. a decrease in the BPR's health level; and/or b. temporary suspension of some business activities.
(3) In the event that BPR has been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 45, Article 46 paragraph (1), and/or paragraph (3), the principal party of the BPR may be subject to administrative sanctions in the form of a prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions.

CHAPTER IX
TRANSITIONAL PROVISIONS

Article 48
The provisions regarding Idle Property as referred to in Article 36 and Article 37 are implemented with the following provisions:
a. for property owned before this Financial Services Authority Regulation takes effect, it is designated as Idle Property if within a period of 3 (three) years after this Financial Services Authority Regulation takes effect it is not used for business activities related to BPR operations and the BPR considers Idle Property as a reduction factor for core capital in the KPMM calculation as referred to in Article 37. b. for property owned after this Financial Services Authority Regulation takes effect, it is designated as Idle Property as referred to in Article 36 and the BPR considers Idle Property as a reduction factor for core capital in the KPMM calculation as referred to in Article 37.

Article 49
The provisions regarding:
a. capital participation as referred to in Article 16; and b. CKPN as referred to in Article 26 and Article 27, take effect as of January 1, 2025.

Article 50
At the time this Financial Services Authority Regulation takes effect, the formation of PPKA as referred to in Article 24 is conducted until December 31, 2024.

CHAPTER X
CLOSING PROVISIONS

Article 51
At the time this Financial Services Authority Regulation takes effect, the provisions as referred to in Article 7 paragraph (3) and Article 8 paragraph (5) of Financial Services Authority Regulation Number 5/POJK.03/2015 regarding Minimum Capital Provision and Minimum Core Capital Fulfillment for People's Economic Banks (State Gazette of the Republic of Indonesia Year 2015 Number 73, Supplement to the State Gazette of the Republic of Indonesia Number 5686) are repealed and declared invalid.

Article 52
At the time this Financial Services Authority Regulation comes into force, Financial Services Authority Regulation Number 33/POJK.03/2018 regarding Productive Asset Quality and the Formation of Provisions for the Write-off of Productive Assets of People's Credit Banks (State Gazette of the Republic of Indonesia Year 2018 Number 258, Additional State Gazette of the Republic of Indonesia Number 6284), is repealed and declared invalid.

Article 53
This Financial Services Authority Regulation comes into force on the date of its enactment.

This copy is in accordance with the original
Director of Law 1
Legal Department
Mufli Asmawidjaja

To ensure everyone is aware, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Determined in Jakarta on January 10, 2024
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,
MAHENDRA SIREGAR

Enacted in Jakarta on January 11, 2024
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2024 NUMBER 1/OJK signed

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 1 OF 2024
REGARDING
ASSET QUALITY
OF PEOPLE'S ECONOMIC BANKS

I. GENERAL

People's Credit Banks (BPRs) as intermediary institutions conducting business activities of collecting and channeling funds from and to the public, must always pay attention to the principle of prudence and the principle of healthy lending, including policies in granting Credit, Credit quality assessment, as well as professionalism and integrity of the Board of Directors, Board of Commissioners, and BPR employees in the lending field so that Credit quality remains performing.

In addition to managing Productive Assets in the form of Credit granted, BPRs need to ensure that Asset management in general is conducted with attention to the principle of prudence and risk management.

Considering that there are several regulations related to BPR prudence principles and to implement the provisions of Article 12A and Article 15 of Law Number 7 of 1992 regarding Banking as amended several times, most recently by Law Number 4 of 2023 regarding the Development and Strengthening of the Financial Sector, as well as changes in accounting standards applicable to BPRs, it is necessary to harmonize regulations so that the implementation of the aforementioned provisions can be carried out well, thereby creating a productive, healthy, and competitive BPR industry.

In light of this, and considering the dynamic and challenging development of the BPR industry in facing Asset management risks, it is necessary to refine regulations regarding Asset quality, including the expansion of the scope of Productive Assets, mechanisms and timeframes for resolving NPLs (AYDA), obligations to form CKPN in accordance with accounting standards, and other regulations.

II. ARTICLE BY ARTICLE

Article 1
Is clear enough.

Article 2
Paragraph (1)
The principle of prudence in Asset management, particularly Credit, is carried out among others based on business feasibility analysis by paying attention to at least the 5C’s factors, namely character, capacity, capital, collateral, and the Debtor’s business prospects (condition of economy).

Paragraph (2)
Good quality in Productive Assets is indicated by performing quality. Steps required to maintain good Asset quality include among others the effective application of credit risk management, including through the preparation and implementation of lending policies and guidelines in accordance with this Financial Services Authority Regulation.

Article 3
Paragraph (1)
Is clear enough.

Paragraph (2)
The determination of Productive Asset quality by the Financial Services Authority is based among others on the results of Financial Services Authority examinations regarding the assessment and information on the condition of the Debtor.

Paragraph (3)
Is clear enough.

Article 4
Paragraph (1)
The same project or business includes projects or businesses that are the source of repayment of principal and/or interest.

Paragraph (2)
Example 1:
BPR B provides Investment Credit and Working Capital Credit facilities to Debtor A. The assessment results conducted by BPR B for each of these facilities:
a. Performing, for Investment Credit; and b. Substandard, for Working Capital Credit.
Given that both Credits are used to finance 1 (one) same Debtor, the Productive Asset quality determined by BPR B for the Credit granted to Debtor A follows the lower Productive Asset quality, namely substandard.

Example 2:
BPR B provides Credit facilities to Debtor A and Debtor C which are used to finance the same project, namely Project D. The main source of Credit repayment, by both Debtor A and Debtor C, comes from the cash flow to be obtained from Project D. The assessment results conducted by BPR B for the Credit granted to Debtor A and Debtor C:
a. Performing, for Debtor A; and b. Substandard, for Debtor C.
Given that both Credits are used to finance the same project and the source of repayment of loan obligations comes from the same project, the Productive Asset quality determined by BPR B for the Credit granted to Debtor A and Debtor C follows the lower Productive Asset quality, namely substandard.

Paragraph (3)
Example of determining Productive Asset quality based on different assessment factors:

BPR A determines Productive Asset quality in the form of Credit to BPR B based on assessment factors of business prospects, debtor performance, and repayment ability.
On the other hand, BPR A determines Productive Asset quality in the form of Placements in Other Banks at BPR B based on assessment factors of days in arrears and/or the supervisory status of BPR B. Because there are differences in assessment factors for determining Productive Asset quality in the form of Credit and Placements in Other Banks, the Productive Asset quality in the form of Credit and Placements in Other Banks can be determined differently.

Article 5
Paragraph (1)
The same project includes projects that are the source of repayment of principal and/or interest.

Paragraph (2)
Letter a
The amount limit as referred to in this regulation is calculated against all facilities granted to each debtor or each project, both for individual debtors and borrower groups if Productive Assets are used to finance the same project. Productive Assets granted by each BPR with an amount greater than Rp1,000,000,000.00 (one billion rupiah) to 1 (one) debtor or 1 (one) same project are not influenced by the Productive Asset quality granted by other BPRs to the same debtor or project with an amount less than or equal to Rp1,000,000,000.00 (one billion rupiah).

Letter b
The 25 (twenty-five) largest debtors are determined individually by the BPR. The amount limit as referred to in this regulation is calculated against all facilities granted to each debtor. Productive Assets granted by a BPR with an amount greater than Rp500,000,000.00 (five hundred million rupiah) up to Rp1,000,000,000.00 (one billion rupiah) to 1 (one) debtor who is one of the 25 (twenty-five) largest debtors of that BPR are not influenced by the Productive Asset quality granted by other BPRs to the same debtor or project with an amount less than or equal to Rp1,000,000,000.00 (one billion rupiah).

Example:
Debtor A is:
a. One of the 25 (twenty-five) largest debtors of BPR C with a Credit portfolio of Rp750,000,000.00 (seven hundred fifty million rupiah) with Performing quality; b. A debtor from BPR D with a portfolio of Rp750,000,000.00 (seven hundred fifty million rupiah) with Special Mention quality. BPR C does not need to equalize the quality of the debtor against Debtor A to Special Mention, considering BPR D's Credit portfolio against debtor A is less than Rp1,000,000,000.00 (one billion rupiah).

Letter c
Productive Assets granted based on a Joint Credit agreement, i.e., Credit structures such as syndication. In determining the same quality for Productive Assets granted based on a Joint Credit agreement, there is no minimum amount limit. Thus, Productive Assets granted to 1 (one) debtor or 1 (one) same project based on a Joint Credit agreement are determined to have the same quality even if the Productive Assets granted by each BPR are less than or equal to Rp1,000,000,000.00 (one billion rupiah).

Paragraph (3)
Example:
BPR B and BPR C have a Joint Credit agreement (syndication) to provide Credit facilities to Debtor A. The assessment results conducted by BPR B and BPR C for the Credit granted to Debtor A:
a. Performing, at BPR B; and b. Substandard, at BPR C.
Given that the facility is granted to the same Debtor and the source of repayment of obligations comes from the same business, and there is no clear separation of cash flows, the quality determined for the Credit facility to Debtor A, both by BPR B and BPR C, is the same, following the lower Productive Asset quality, namely substandard.

Paragraph (4)
Example of determining Productive Asset quality based on different assessment factors:
Credit quality is determined based on assessment factors of business prospects, debtor performance, and repayment ability. On the other hand, Securities quality is determined based on assessment factors of ratings, timeliness of coupon payments or similar obligations, and payment maturity. Because there are differences in assessment factors for determining Credit and Securities quality, the quality of Credit and Securities can be determined differently even for the same debtor or project.

Paragraph (5)
Is clear enough.

Article 6
Paragraph (1)
Letter a
Sources of funds include among others salaries, inheritances, and/or other income.

Letter b
The term "clear separation of cash flows from each different project, business, or source of funds" means there is no significant correlation in cash flows between projects, businesses, or sources of funds. Cash flow correlation is considered significant among others in cases where the continuity of cash flow of a project, business, or source of funds will be disrupted if the cash flow of another project, business, or source of funds experiences disruption. Information on the separation of cash flows from each project, business, or source of funds is included in the credit analysis during the credit granting process and documented adequately.

Paragraph (2)
Is clear enough.

Paragraph (3)
Is clear enough.

Paragraph (4)
The submission of reports on quality differences is done in portable document format (.pdf).

Paragraph (5)
Is clear enough.

Article 7
Paragraph (1)
Business prospects include the prospects of projects that are part of that business.

Paragraph (2)
The limit is calculated against all Credit facilities granted to 1 (one) Debtor or more than 1 (one) Debtor when Credit is used to finance the same project or business.
Timeliness of principal and/or interest repayment is assessed among others through timely repayment of principal and/or interest, and/or no arrears and in accordance with the agreed Credit requirements.

Paragraph (3)
Is clear enough.

Article 8
Paragraph (1)
Letter a
Potential business growth is assessed among others through projections of the Debtor's business growth.

Letter b
Market conditions and the Debtor's position in competition are assessed among others through the impact of economic conditions and/or business competition in the market on the Debtor's business.

Letter c
Management quality and labor issues are assessed among others through the Debtor's business management governance, workforce composition, and/or labor disputes or strikes.

Letter d
Support from owners, groups, or affiliates is assessed among others from the capacity and ability of owners, groups, or affiliates to support the Debtor's business.

Letter e
The term "Debtor" refers to a Debtor who has an obligation to carry out environmental management efforts in accordance with statutory regulations regarding environmental protection and management.

Paragraph (2)
Letter a
Profitability is assessed among others through income and cost analysis (cost and benefit analysis) and/or profit growth from period to period.

Letter b
Capital structure is assessed among others through the Debtor's capital ability to finance the business, including the ability to add capital if necessary.

Letter c
Cash flow is assessed among others through the analysis of the Debtor's business liquidity and working capital and/or the Debtor's ability to meet principal and/or interest payment obligations without support from other funding sources besides the financed project or business.

Paragraph (3)
Letter a
Timeliness of principal and/or interest repayment is assessed among others through timely repayment of principal and/or interest, and/or no arrears and in accordance with the agreed Credit requirements.

Letter b
Availability and accuracy of Debtor financial information is assessed among others through the regular and accurate submission of financial information by the Debtor, which can be trusted for its correctness.

Letter c
Completeness of Credit documentation is assessed among others through the fulfillment of Credit documentation requirements based on lending policies and procedures.

Letter d
Compliance with Credit agreements is assessed among others through the level of Debtor violations of the Credit agreement.

Letter e
Appropriateness of fund usage is assessed among others through the correspondence between the actual use of funds and the purpose of the Credit application and/or the correspondence of Credit facilities with the Debtor's needs.

Letter f
Fairness of the source of repayment of obligations is assessed among others through the correspondence of the source of repayment of obligations with the project or business financed by the BPR or the income of the respective Debtor.

Article 9
Is clear enough.

Article 10
Conditions causing a Debtor to have no ability to repay principal and/or interest include among others the source of principal and/or interest repayment coming from the same BPR.

Article 11
Is clear enough.

Article 12
Credit granting deviations include among others Credit granted using fake identities or the identity of another party who does not enjoy the Credit facility.

Article 13
Paragraph (1)
The term "grace period" refers to the period granted to not make principal and/or interest installment payments while the Debtor's project or business has not yet generated revenue. Example: Credit for agriculture with a grace period during the planting period. The granting of a grace period is included in the Credit agreement.

Paragraph (2)
Is clear enough.

Article 14
Is clear enough.

Article 15
Is clear enough.

Article 16
Is clear enough.

Article 17
Paragraph (1)
Is clear enough.

Paragraph (2)
Is clear enough.

Paragraph (3)
The term "blocked" refers to actions preventing the transfer, change of form, exchange, placement, distribution, relocation, or movement of collateral for a certain period.

Article 18
Is clear enough.

Article 19
Is clear enough.

Article 20
Paragraph (1)
Letter a
The term "market value" is the estimated money that can be obtained from a sale and purchase transaction or the result of exchanging an asset on the valuation date after deducting transaction costs. The market value of jewelry gold refers to the prevailing price in the local gold market. The determination of the market value of jewelry gold can be done by the BPR's internal appraiser or an independent appraiser, such as a gold shop or a gold pawn institution. The BPR's internal appraiser is permitted as long as the BPR employee has adequate ability and experience in valuing jewelry gold.

Letter b
The term "land and/or buildings with certificates" refers to land and/or buildings, with proof of ownership of land and/or building rights in the form of ownership rights, business use rights, building use rights, use rights, and/or building ownership certificates for apartment units. Included in buildings are single-story houses, apartments, shophouses, office houses, or office buildings. Properties that can be burdened with fiduciary rights include among others apartments with proof of ownership certificates for apartment units in accordance with statutory regulations.

Letter c
Is clear enough.

Letter d
Included in buildings are single-story houses, apartments, shophouses, office houses, or office buildings.

Letter e
The term "Taxable Tax Notification Letter or last Object Tax Value Notification Letter" refers to the available Taxable Tax Notification Letter or last Object Tax Value Notification Letter. The term "native land acknowledgment letter" includes among others girik letters, petok D, letter C, rincik, and/or ketitir.

Letter f
The term "business place" includes among others stalls, kiosks, and/or market stalls.

Letter g
Mortgage for ships with a weight of 20 m3 and above in accordance with statutory regulations.

Letter h
Is clear enough.

Letter i
The term "Secured Credit" includes among others Credit secured by employment termination insurance for Credit to employees in accordance with agreed agreements.

Letter j
Is clear enough.

Letter k
The term "independent appraiser" refers to an appraiser who:
a. is not a related party to the BPR; b. is not a borrower group with the BPR's Debtor;
c. meets requirements according to regulations set by the competent authority.

Paragraph (2)
Is clear enough.

Paragraph (3)
Example:
On September 20, 2023, BPR Y provided a Credit facility to Debtor X with collateral in the form of land burdened with a land mortgage right worth Rp375,000,000.00 (three hundred seventy-five million rupiah). The collateral that can be calculated as a reduction factor for special PPKA is 80% (eighty percent) of the collateral value, namely Rp300,000,000.00 (three hundred million rupiah). On September 20, 2025, the Credit facility was declared non-performing by BPR Y. If after 2 (two) years, namely after September 19, 2027, the non-performing Credit of Debtor X has not been resolved or there is no resolution in the form of Credit Restructuring or collateral takeover, the collateral value used as a reduction factor for special PPKA is 50% (fifty percent) of Rp300,000,000.00 (three hundred million rupiah), namely Rp150,000,000.00 (one hundred fifty million rupiah). If after 4 (four) years, namely after September 19, 2029, the non-performing Credit of Debtor X above is still not resolved or there is no resolution in the form of Credit Restructuring or collateral takeover, the collateral value cannot be calculated as a reduction factor in the formation of PPKA.

Paragraph (4)
The Debtor's obligation to the BPR calculates the remaining principal balance, interest, and other costs related to credit settlement in accordance with the credit agreement, including costs required to execute the collateral.

Paragraph (5)
Example:
On September 20, 2023, BPR Y provided a Credit facility to Debtor X with collateral in the form of a motor vehicle burdened with fiduciary rights worth Rp100,000,000.00 (one hundred million rupiah). The collateral that can be calculated as a reduction factor for special PPKA is 50% (fifty percent) of the collateral value, namely Rp50,000,000.00 (fifty million rupiah). On September 20, 2025, the Credit facility was declared non-performing by BPR Y. If after 1 (one) year, namely after September 19, 2026, the non-performing Credit of Debtor X has not been resolved or there is no resolution in the form of Credit Restructuring or collateral takeover, the collateral value used as a reduction factor for special PPKA is 50% (fifty percent) of Rp50,000,000.00 (fifty million rupiah), namely Rp25,000,000.00 (twenty-five million rupiah). If after 2 (two) years, namely after September 19, 2027, the non-performing Credit of Debtor X is still not resolved or there is no resolution in the form of Credit Restructuring or collateral takeover, the collateral value cannot be calculated as a reduction factor in the formation of PPKA.

Paragraph (6)
Analysis of the local and surrounding economic conditions is based among others on:

economic growth; and
observation of prices and/or sales levels:
a. land; and/or b. buildings, in that area.

Article 21
Paragraph (1)
The term "collateral valuation" is the estimate and opinion by the BPR's internal appraiser and/or independent appraiser on the economic value of collateral based on analysis of objective and relevant facts according to methods and principles generally applicable in the valuation of each type of collateral. Periodic collateral valuation is carried out among others by re-evaluating collateral during credit restructuring. The term "periodically" means according to the collateral valuation period as contained in the BPR's lending policy and lending procedures.

Paragraph (2)
Is clear enough.

Paragraph (3)
The term "significant decline in collateral value" includes among others a decline in collateral value caused by fire and/or natural disasters.

Article 22
Is clear enough.

Article 23
The term "Deposit Insurance Agency" refers to the Deposit Insurance Agency as referred to in the Law regarding the Deposit Insurance Agency.

Example:
BPR X places funds in Bank Y with the following details:

Placement Type	Placement Amount	Quality
Demand Deposit	Rp2,000,000,000.00	Performing
Savings	Rp1,000,000,000.00	Performing
Time Deposit	Rp4,000,000,000.00	Performing
Certificate of Deposit	Rp3,000,000,000.00	Performing
Total Placement	Rp10,000,000,000.00

All of BPR X's fund placements in Bank Y meet the Deposit Insurance Agency's guarantee criteria, including among others the interest rate on Placements in Other Banks.
Assuming the guaranteed balance in accordance with statutory regulations regarding guarantee by the Deposit Insurance Agency for each customer at one bank is at most Rp2,000,000,000.00 (two billion rupiah), the formation of PPKA that must be formed for all of BPR X's placements in Bank Y is as follows:
PPKA = 0.5% x (Rp10,000,000,000.00 – Rp2,000,000,000.00) = Rp40,000,000.00

Example 2:
BPR A places funds in Bank B with the following details:

Placement Type	Placement Amount	Quality
Demand Deposit	Rp2,000,000,000.00	Substandard
Savings	Rp1,000,000,000.00	Substandard
Time Deposit	Rp4,000,000,000.00	Substandard
Certificate of Deposit	Rp3,000,000,000.00	Substandard
Total Placement	Rp10,000,000,000.00

All of BPR X's fund placements in Bank Y meet the Deposit Insurance Agency's guarantee criteria, including among others the interest rate on Placements in Other Banks.
Assuming the guaranteed balance in accordance with statutory regulations regarding guarantee by the Deposit Insurance Agency for each customer at one bank is at most Rp2,000,000,000.00 (two billion rupiah), the formation of special PPKA that must be formed for all of BPR X's placements in Bank Y is as follows:
Special PPKA = 10% x (Rp10,000,000,000.00 – Rp2,000,000,000.00) = Rp800,000,000.00

Article 24
Is clear enough.

Article 25
Counterparties include among others fraud perpetrators.

Article 26
Is clear enough.

Article 27
Is clear enough.

Article 28
Is clear enough.

Article 29
Paragraph (1)
Is clear enough.

Paragraph (2)
Letter a
Rescheduling is carried out through, among other things, changes to the Debtor's payment schedule for obligations and/or changes to the term.
Letter b
Revised terms are carried out through, among other things:
a. changes to the payment amount or installments; b. changes to the term;
c. reduction of the Credit interest rate; and/or
d. elimination of part of the obligation.
Letter c
Restructuring is carried out through, among other things:
a. addition of BPR Credit facilities; and/or b. conversion of all or part of the interest installment arrears into a new Credit principal, which may be accompanied by rescheduling or revised terms. Paragraph (3) Sufficiently clear. Paragraph (4) What is meant by "previous Credit agreement" is all related Credit agreements that are still in effect between the BPR and the Debtor.

Article 30
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
What is meant by "objectivity" is an honest attitude without being influenced by personal opinions and considerations or groups in making decisions or taking actions.
Letter b
What is meant by "independence" is the professional management of the BPR without influence or pressure from any party.
Letter c
Conflicts of interest include, among other things, differences between the economic interests of the BPR and the personal economic interests of shareholders, members of the Board of Directors, members of the Board of Commissioners, Executive Officials, and/or Related Parties with the BPR. What is meant by "executive official" is an executive official in accordance with the Financial Services Authority Regulation regarding BPR. Letter d What is meant by "fairness" is justice and equality in fulfilling the rights of stakeholders arising from agreements and provisions of legislation.

Article 31
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Example 1:
BPR X grants Credit to Debtor A with an amount of Rp1,000,000,000.00 (one billion rupiah). However, Debtor A experiences difficulty in paying principal and/or interest so that the Credit quality is set as non-performing and Credit Restructuring is carried out by BPR X by considering that Debtor A still has good business prospects and is assessed to be able to fulfill obligations after Credit Restructuring. The determination of Debtor A's Credit quality after Credit Restructuring is as follows:

Example 2:
BPR X grants Credit to Debtor B with an amount of Rp7,000,000,000.00 (seven billion rupiah). However, Debtor B experiences difficulty in paying principal and/or interest so that the Credit quality is set as non-performing and Credit Restructuring is carried out by BPR X by considering that Debtor B still has good business prospects and is assessed to be able to fulfill obligations after Credit Restructuring. The determination of Debtor B's Credit quality after Credit Restructuring is as follows:

Period	Payment	Credit Quality at End of Assessment Month
		Principal	Interest
0	Restructuring	Non-Performing
1	Fulfill	Fulfill	Non-Performing
2	Fulfill	Fulfill	Non-Performing
3	Fulfill	Fulfill	Performing
4	Fulfill	Fulfill	Credit Quality of Debtor A is determined based on the timeliness of principal and/or interest payments.

Example 3:
BPR X grants Credit to Debtor C with an amount of Rp1,000,000,000.00 (one billion rupiah). However, Debtor C experiences difficulty in paying principal and/or interest so that the Credit quality is set as non-performing and Credit Restructuring is carried out by BPR X by considering that Debtor C still has good business prospects and is assessed to be able to fulfill obligations after Credit Restructuring. The determination of Debtor C's Credit quality after Credit Restructuring is as follows:

Period	Payment	Credit Quality at End of Assessment Month
		Principal	Interest
0	Restructuring	Non-Performing
1	Fulfill	Fulfill	Non-Performing
2	Fulfill	Fulfill	Non-Performing
3	Fulfill	Fulfill	Performing
4	Fulfill	Fulfill	Credit Quality of Debtor B is determined based on business prospects, Debtor performance, and repayment ability.

There are no principal and/or interest arrears after Credit Restructuring is carried out because in the example above, the period 2 principal arrears have been paid off.
There are principal and/or interest arrears after Credit Restructuring is carried out because in the example above, in period 3 the Debtor did not pay the period 2 principal arrears, so the Credit quality is set the same as the Credit quality before Credit Restructuring was carried out.

Example 4:
BPR X grants Credit to Debtor D with an amount of Rp7,000,000,000.00 (seven billion rupiah). However, Debtor D experiences difficulty in paying principal and/or interest so that the Credit quality is set as non-performing and Credit Restructuring is carried out by BPR X by considering that Debtor D still has good business prospects and is assessed to be able to fulfill obligations after Credit Restructuring. The determination of Debtor D's Credit quality after Credit Restructuring is as follows:

Period	Payment	Credit Quality at End of Assessment Month
		Principal	Interest
0	Restructuring	Non-Performing
1	Fulfill	Fulfill	Non-Performing
2	Not Fulfill	Fulfill	Non-Performing
3	Fulfill	Fulfill	Performing*
4	Fulfill	Fulfill	Credit Quality of Debtor C is determined based on the timeliness of principal and/or interest payments.

There are no principal and/or interest arrears after Credit Restructuring is carried out because in the example above, the period 2 principal arrears have been paid off.
There are principal and/or interest arrears after Credit Restructuring is carried out because in the example above, in period 3 the Debtor did not pay the period 2 principal arrears, so the Credit quality is set the same as the Credit quality before Credit Restructuring was carried out.

Paragraph (3)
Sufficiently clear.

Article 32
Accounting treatment for Credit Restructuring is applied, among other things, to the recognition of losses arising from Credit Restructuring.

Article 33
Sufficiently clear.

Article 34
Sufficiently clear.

Article 35
Sufficiently clear.

Period	Payment	Credit Quality at End of Assessment Month
		Principal	Interest
0	Restructuring	Non-Performing
1	Fulfill	Fulfill	Non-Performing
2	Not Fulfill	Fulfill	Non-Performing
3	Fulfill	Fulfill	Performing*
4	Fulfill	Fulfill	Credit Quality of Debtor C is determined based on business prospects, Debtor performance, and repayment ability.

Article 36
Paragraph (1)
Idle Property includes, among other things, land and/or buildings that are not used for BPR business activities such as buildings and/or land that are leased. Not included in Idle Property are properties used to support BPR business activities and owned in reasonable amounts such as official residences, properties used for educational facilities, and other properties that have been designated for use in business activities in the near future. Paragraph (2) Properties used for BPR business activities are predominantly those with a share of more than 50% (fifty percent). The measurement of the portion used for BPR business activities is carried out separately for each property. On September 20, 2024, BPR purchased land and buildings to be used for the opening of a new branch office with an acquisition value of Rp500,000,000.00 (five hundred million rupiah). If after 3 (three) years, namely after September 19, 2027, the land and buildings mentioned are not used for branch offices, since September 20, 2027, the BPR sets the land and buildings mentioned as Idle Property at their recorded value. Paragraph (3) Sufficiently clear. Paragraph (4) The determination of Idle Property by the Financial Services Authority is based, among other things, on the results of examinations by the Financial Services Authority regarding the utilization of property.

Article 37
Paragraph (1)
Settlement efforts can, among other things, be carried out by actively marketing to sell Idle Property.
Paragraph (2)
Documentation includes, among other things, evidence of data and information regarding marketing efforts for the sale of Idle Property.
Paragraph (3)
Example:
On September 20, 2027, BPR sets land and buildings as Idle Property with a recorded value of Rp350,000,000.00 (three hundred fifty million rupiah). a. If after 1 (one) year from the date of determination of Idle Property, BPR has not been able to use the land and buildings mentioned for BPR operational activities, in the BPR's KPMM calculation, from September 20, 2028 to September 19, 2030, the value of idle property considered as a factor reducing BPR X's core capital:
Idle Property = 15% x Rp350,000,000.00
= Rp52,500,000.00 b. If after 3 (three) years from the date of determination of Idle Property, BPR has not been able to use the land and buildings mentioned for BPR operational activities, in the BPR's KPMM calculation, from September 20, 2030 to September 19, 2032, the value of idle property considered as a factor reducing BPR X's core capital:
Idle Property = 50% x Rp350,000,000.00
= Rp175,000,000.00
c. If after 5 (five) years from the date of determination of Idle Property, BPR has not been able to use the land and buildings mentioned for BPR operational activities, in the BPR's KPMM calculation, from September 20, 2032, the value of idle property considered as a factor reducing BPR X's core capital:
Idle Property = 100% x Rp350,000,000.00
= Rp350,000,000.00
Paragraph (4)
See the explanation of Article 20 paragraph (6).

Article 38
Sufficiently clear.

Article 39
Paragraph (1)
Sufficiently clear.
Paragraph (2)
What is meant by "assessment of each collateral" is the appraisal and opinion by the BPR's internal appraiser and/or independent appraiser on the economic value of the collateral based on analysis of objective and relevant facts according to methods and principles generally applicable in the appraisal of each type of collateral. What is meant by "independent appraiser" is an appraiser who:
a. is not a related party to the BPR; b. is not a borrower group with the BPR Debtor;
c. meets the requirements according to provisions set by the competent authority.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
What is meant by "periodically" is according to the assessment period for collateral as contained in the BPR's credit policy and credit procedures.
Paragraph (5)
Sufficiently clear.
Paragraph (6)
Sufficiently clear.
Paragraph (7)
Sufficiently clear.
Paragraph (8)
Sufficiently clear.

Article 40
Paragraph (1)
What is meant by "disbursed as soon as possible" is that the BPR immediately carries out disbursement efforts against AYDA. If there is a buyer offering a fair or non-detrimental purchase price to the BPR, the BPR must be able to complete the said purchase offer and not hold back or delay the said purchase offer. Thus, the disbursement of AYDA is carried out as soon as possible. Efforts to disburse AYDA are carried out, among other things, by actively marketing and selling AYDA. Paragraph (2) Example:
On September 20, 2023, BPR X takes over AYDA in the form of land submitted by the Debtor with a net realizable value of Rp100,000,000.00 (one hundred million rupiah). a. If after 1 (one) year from the date of taking over AYDA, BPR X has not been able to disburse AYDA, in the BPR X's KPMM calculation, from September 20, 2024 to September 19, 2026, the value of AYDA considered as a factor reducing BPR X's core capital:
AYDA = 15% x Rp100,000,000.00
= Rp15,000,000.00 b. If after 3 (three) years from taking over AYDA, BPR X has not been able to disburse AYDA, in the BPR X's KPMM calculation, from September 20, 2026 to September 19, 2028, the value of AYDA considered as a factor reducing BPR X's core capital:
AYDA = 50% x Rp100,000,000.00
= Rp50,000,000.00
c. If after 5 (five) years from taking over AYDA, BPR X has not been able to disburse AYDA, in the BPR X's KPMM calculation, from September 20, 2028, the value of AYDA considered as a factor reducing BPR X's core capital:
AYDA = 100% x Rp100,000,000.00
= Rp100,000,000.00
Paragraph (3)
Example:
On September 20, 2023, BPR X takes over AYDA in the form of motor vehicles submitted by the Debtor with a net realizable value of Rp100,000,000.00 (one hundred million rupiah). a. If after 1 (one) year from the date of taking over AYDA, BPR X has not been able to disburse AYDA, in the BPR X's KPMM calculation, from September 20, 2024 to September 19, 2025, the value of AYDA considered as a factor reducing BPR X's core capital:
AYDA = 50% x Rp100,000,000.00
= Rp50,000,000.00 b. If after 2 (two) years from taking over AYDA, BPR X has not been able to disburse AYDA, in the BPR X's KPMM calculation, from September 20, 2025, the value of AYDA considered as a factor reducing BPR X's core capital:
AYDA = 100% x Rp100,000,000.00
= Rp100,000,000.00
Paragraph (4)
Sufficiently clear.
Paragraph (5)
Sufficiently clear.
Paragraph (6)
Analysis of the local and surrounding economic conditions is based, among other things, on:

economic growth; and
observation of prices and/or sales levels:
a. land; and/or b. buildings, in the area.
Example:
The Financial Services Authority sets an additional time for settling AYDA for 1 (one) year, the calculation of AYDA as a factor reducing BPR core capital in the KPMM ratio calculation is:
a. 15% (fifteen percent) of the AYDA value for AYDA owned for more than 2 (two) years up to 4 (four) years; b. 50% (fifty percent) of the AYDA value for AYDA owned for more than 4 (four) years up to 6 (six) years; and/or
c. 100% (one hundred percent) of the AYDA value for AYDA owned for more than 6 (six) years.

Article 41
Sufficiently clear.

Article 42
Paragraph (1)
Sufficiently clear.
Paragraph (2)
The implementation of write-off is carried out against all funds provided in one agreement.

Article 43
Paragraph (1)
Efforts to recover Productive Assets provided for fund provision are, among other things, in the form of collection from the Debtor, Credit Restructuring, collection from parties providing guarantees for Productive Assets, and settlement of Credit through collateral sale. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear.

Article 44
Sufficiently clear.

Article 45
Paragraph (1)
Periodic evaluation of credit policy and credit procedures is carried out by considering provisions of legislation.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Sufficiently clear.

Article 46
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Letter a
Sufficiently clear.
Number 1
Sufficiently clear.
Number 2
Sufficiently clear.
Number 3
Sufficiently clear.
Number 4
What is meant by "related party" is a related party in accordance with the Financial Services Authority Regulation regarding the maximum limit for providing credit to people's economic banks and the maximum limit for providing funds to sharia people's financing banks. Number 5 Sufficiently clear. Letter b Sufficiently clear. Letter c Sufficiently clear.

Article 47
Sufficiently clear.

Article 48
Sufficiently clear.

Article 49
Sufficiently clear.

Article 50
Sufficiently clear.

Article 51
Sufficiently clear.

Article 52
Sufficiently clear.

Article 53
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 71/OJK

APPENDIX I
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 1 OF 2024
CONCERNING
PRODUCTIVE ASSET QUALITY OF PEOPLE'S ECONOMIC BANKS

PRODUCTIVE ASSET QUALITY DIFFERENCE REPORT
BPR Name :
Report Position :
No. Debtor Name
Identity Number
Debtor Address
At the Relevant BPR
At Other BPR
Remarks
Account Number
Type of Use
Credit Limit
Outstanding Balance
Term
Quality
Name of Other BPR
Type of Use
Credit Limit
Outstanding Balance
Term
Quality

Debtor Name
Filled with the Debtor's name, whether individual or business entity.
Name of Other BPR
Filled with the name of another BPR that grants Credit to the Debtor who is granted Credit by the relevant BPR.
Identity Number
Filled with the Debtor's identity number who receives credit facilities from the BPR, namely the National Identity Number (NIK) if the debtor is an individual or the Taxpayer Identification Number (NPWP) if the Debtor is a business entity.
Debtor Address
Filled with the complete address of the Debtor or the Debtor's business location address.
Account Number
Filled with the account number in accordance with the Financial Services Authority Circular regarding monthly BPR reports.
Type of Use
Filled with the type of use in the form of working capital, investment, or consumption in accordance with the Financial Services Authority Circular regarding monthly BPR reports.
Credit Limit
Filled with the credit limit in accordance with the Financial Services Authority Circular regarding monthly BPR reports.

This copy is in accordance with the original
Director of Law 1
Legal Department
Mufli Asmawidjaja
8. Outstanding Balance
Filled with the outstanding balance in accordance with the Financial Services Authority Circular regarding monthly BPR reports.
9. Term
Filled with the duration of Credit provision and expressed in months, for example, 12 (twelve) months, 24 (twenty-four) months, and others.
10. Quality
Filled with the quality code in accordance with the Financial Services Authority Circular regarding monthly BPR reports.
11. Remarks
Filled with information related to the debtor, including project and/or business financing information, installment payment sources, reasons for quality difference determination, and others.

Determined in Jakarta on January 10, 2024
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,
MAHENDRA SIREGAR signed signed

APPENDIX II
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 1 OF 2024
CONCERNING
PRODUCTIVE ASSET QUALITY OF PEOPLE'S ECONOMIC BANKS

DETERMINATION OF PRODUCTIVE ASSET QUALITY IN THE FORM OF CREDIT BUSINESS PROSPECTS

Component	Performing	Special Attention	Non-Performing	Doubtful	Loss
1. Business Growth Potential	Business activities still have growth.	Business activities do not have growth.	Business activities have negative growth.	Business activities are likely to have the potential to cease operations in the near future.	No business growth potential (business has ceased operations).
2. Market Conditions and Debtor's Position in Competition	- Stable market.<br>- Debtor's position in the market is quite good with intense competition.	- Debtor's position in the market is not good.<br>- Debtor's position in the market is weak.<br>- Loss of market share in line with deteriorating economic conditions.	- Debtor's position in the market is good, including a strong position in the market.<br>- Market share is comparable to competitors.<br>- Market is influenced by changes in economic conditions.	- Market is influenced by significant changes in economic conditions.<br>- Debtor's business has ceased operations.
3. Management Quality and Labor Issues	- Management quality is very good.<br>- Management quality is good.	- Management quality is quite good.<br>- Management quality is not good.	- Management quality is poor (no human resources supporting business implementation).<br>- No recorded management disputes or labor strikes in the last 1 (one) year, or experienced minor management disputes or labor strikes in the last 1 (one) year but resolved well.	- Experienced management disputes or labor strikes in the last 1 (one) year that were resolved well but there is a possibility of recurrence.<br>- There are management disputes or labor strikes in the last 1 (one) year with a fairly material impact on the Debtor's business activities.	- There are management disputes or labor strikes in the last 1 (one) year with a material impact on the Debtor's business activities.
4. Support from Owners, Groups, or Affiliations	Owners, groups, or affiliates are stable and support the Debtor's business.	Owners, groups, or affiliates are stable and do not have a burdensome impact on the Debtor.	Owners, groups, or affiliates are less stable and begin to have a burdensome impact on the Debtor.	Owners, groups, or affiliates have had a burdensome impact on the Debtor.	Owners, groups, or affiliates are very detrimental to the Debtor.
5. Efforts made by the Debtor to maintain the environment (for large-scale Debtors whose business type has an important impact on the environment according to legislation provisions)	Environmental management efforts have been carried out well and achieve results in accordance with minimum requirements according to legislation provisions on environmental protection and management.	Environmental management efforts have been carried out quite well but have not met minimum requirements according to legislation provisions on environmental protection and management.	Environmental management efforts are poor and have not met minimum requirements according to legislation provisions on environmental protection and management.	The company has not carried out environmental management efforts in accordance with legislation provisions on environmental protection and management.	The company has not carried out environmental management efforts in accordance with legislation provisions on environmental protection and management and has the possibility of being sued criminally or civilly in court.

DEBTOR PERFORMANCE

Component	Performing	Special Attention	Non-Performing	Doubtful	Loss
1. Profit Acquisition	• Profit acquisition is good.<br>- Profit acquisition is quite good but tends to decrease.	- Profit acquisition is low and decreasing very significantly.<br>- Incurred losses; and/or<br>- Operational activities are financed by asset sales.	- Incurred large losses and erode capital; and/or<br>- Debtor is unable to fulfill all obligations.
2. Capital Conditions	Capital is very strong.	Capital is strong.	Capital is quite strong.	Capital is not strong.	Capital is weak.
3. Cash Flow	• Liquidity and working capital are strong; and/or<br>- Cash flow analysis shows that the Debtor is able to fulfill principal and interest payment obligations without additional funding support and meet other operational needs.	- Liquidity and working capital are quite strong; and/or<br>- Cash flow analysis shows that although the Debtor is able to fulfill principal and interest payment obligations, there are indications of certain problems that if not addressed will affect future payments.	- Liquidity is low and working capital is limited; and/or<br>- Cash flow analysis shows that the Debtor is only able to pay interest and part of the principal.<br>- Liquidity difficulties; and/or<br>- Cash flow analysis shows that the Debtor is unable to pay principal and interest and cover production costs.	- Liquidity is very low; and/or<br>- Cash flow analysis shows inability to pay principal and interest.

Components
Normal Special Mention Substandard Doubtful Loss

Timeliness of Principal and/or Interest Repayment
a. Loans with installments of 1 (one) month or more

No outstanding principal and/or interest installments;
or
Outstanding principal and/or interest installments exceeding 30 (thirty) days from the due date of the installment but not exceeding 90 (ninety) days from the due date of the installment; and/or
Outstanding principal and/or interest installments exceeding 90 (ninety) days from the due date of the installment but not exceeding 180 (one hundred eighty) days from the due date of the installment; and/or
Outstanding principal and/or interest installments exceeding 180 (one hundred eighty) days from the due date of the installment but not exceeding 360 (three hundred sixty) days from the due date of the installment; and/or
Outstanding principal and/or interest installments exceeding 360 (three hundred sixty) days from the due date of the installment;

Components
Normal Special Mention Substandard Doubtful Loss

Outstanding principal and/or interest installments not exceeding 30 (thirty) days from the due date of the installment and the Loan has not yet matured.
The Loan has matured not exceeding 15 (fifteen) days.
The Loan has matured more than 15 (fifteen) days but not exceeding 30 (thirty) days.
The Loan has matured more than 30 (thirty) days but not exceeding 60 (sixty) days.
The Loan has matured more than 60 (sixty) days;
The Loan has been handed over to the Directorate General of State Assets (DJKN); and/or
The Loan has been submitted for insurance claim to a Credit insurance company.

Components
Normal Special Mention Substandard Doubtful Loss b. Loans with installments of less than 1 (one) month

No outstanding principal and/or interest installments;
or
Outstanding principal and/or interest installments exceeding 15 (fifteen) days from the due date of the installment but not exceeding 30 (thirty) days from the due date of the installment; and/or
Outstanding principal and/or interest installments exceeding 30 (thirty) days from the due date of the installment but not exceeding 90 (ninety) days from the due date of the installment; and/or
Outstanding principal and/or interest installments exceeding 90 (ninety) days from the due date of the installment but not exceeding 180 (one hundred eighty) days from the due date of the installment; and/or
Outstanding principal and/or interest installments exceeding 180 (one hundred eighty) days from the due date of the installment;

Components
Normal Special Mention Substandard Doubtful Loss

Outstanding principal and/or interest installments not exceeding 15 (fifteen) days from the due date of the installment and the Loan has not yet matured.
The Loan has matured not exceeding 15 (fifteen) days.
The Loan has matured more than 15 (fifteen) days but not exceeding 30 (thirty) days.
The Loan has matured more than 30 (thirty) days but not exceeding 60 (sixty) days.
The Loan has matured more than 60 (sixty) days;
The Loan has been handed over to DJKN; and/or
The Loan has been submitted for insurance claim to a Credit insurance company.

Availability and Accuracy of Debtor's Financial Information

The Debtor's relationship with the BPR is good, the Debtor always submits financial information regularly and accurately; and/or
There is the latest financial report and the results of the BPR's analysis of the financial reports or financial information submitted by the Debtor.
The Debtor's relationship with the BPR is deteriorating and financial information cannot be trusted or there are no results of the BPR's analysis of the financial reports/financial information submitted by the Debtor.
The Debtor's relationship with the BPR is very poor and financial information is not available or cannot be trusted.

Components
Normal Special Mention Substandard Doubtful Loss
3. Completeness of Loan Documentation
Loan Documentation is complete.
Loan Documentation is incomplete, inter alia, regarding the Loan application documents, specifically the business owner's identity documents.
Loan Documentation is incomplete, inter alia, regarding the Loan application documents, specifically the business legality documents.
Loan Documentation is significantly incomplete, inter alia, regarding the Loan application documents and the Loan analysis is inadequate.
There is no Loan documentation (Loan application documents, Loan analysis, Loan agreement, Loan disbursement warrants).

Components
Normal Special Mention Substandard Doubtful Loss
4. Compliance with Loan Agreement
No violation of the Loan agreement.
There is a violation of the main requirements of the Loan that can affect the Debtor's ability to pay.
There is a very fundamental violation of the main requirements in the Loan agreement that can affect the Debtor's ability to pay and causes the collateral to be executed.

Components
Normal Special Mention Substandard Doubtful Loss
5. Appropriateness of Fund Usage
Fund usage is in accordance with the Loan application.
Fund usage is less in accordance with the Loan application, but the amount is not material.
Fund usage is less in accordance with the Loan application, with an amount that is quite material.
Fund usage is less in accordance with the Loan application, with a material amount.
Fund usage is not in accordance with the Loan application.

Components
Normal Special Mention Substandard Doubtful Loss
6. Fairness of Payment Source for Obligations
The payment source originates from the results of the financed project or business/the Debtor's income.
The payment source does not always originate from the results of the financed project or business/the Debtor's income.
The payment source originates from other than the results of the financed project or business/the Debtor's income.
The payment source is unknown and the payment source originates from other than the results of the financed project or business/the Debtor's income.
There is no payment source.

DETERMINATION OF PRODUCTIVE ASSET QUALITY IN THE FORM OF SECURITIES Quality of Securities Normal Substandard Loss a. having an investment grade rating or higher established by a rating agency in accordance with regulations governing rating agencies in accordance with Financial Services Authority Circular regarding rating agencies and ratings recognized by the Financial Services Authority. b. coupons and/or other similar obligations are paid in the correct amount and time in accordance with the agreement; and
c. not yet matured;
a. having an investment grade rating or higher; b. there is a delay in payment of coupons and/or other similar obligations; and
c. not yet matured,
or a. having a rating at the lowest 1 (one) level below investment grade; b. there is no delay in payment of coupons and/or other similar obligations; and
c. not yet matured.
if Securities do not meet the quality criteria other than number 1 (Normal) and number 2 (Substandard)

DETERMINATION OF PRODUCTIVE ASSET QUALITY IN THE FORM OF PLACEMENTS WITH OTHER BANKS Quality of Placements with Other Banks Normal Substandard Loss In the event that there are no outstanding principal and/or interest payments. in the event that there are outstanding principal and/or interest payments up to 5 (five) working days. a. there are outstanding principal and/or interest payments more than 5 (five) working days; b. the bank receiving the Placement with Other Bank has been established in a bank rehabilitation status; and/or
c. the bank receiving the Placement with Other Bank has been established in a bank resolution status.

This copy is in accordance with the original
Legal Director 1
Legal Department
Mufli Asmawidjaja

DETERMINATION OF PRODUCTIVE ASSET QUALITY IN THE FORM OF CAPITAL PARTICIPATION Quality of Capital Participation Normal Substandard Doubtful Loss In the event that the party where the BPR makes Capital Participation does not experience cumulative losses based on the latest audited financial statements for the last fiscal year. In the event that the party where the BPR makes Capital Participation experiences cumulative losses up to 25% (twenty-five percent) of the capital of the party where the BPR makes Capital Participation based on the latest audited financial statements for the last fiscal year. In the event that the party where the BPR makes Capital Participation experiences cumulative losses more than 25% (twenty-five percent) up to 50% (fifty percent) of the capital of the party where the BPR makes Capital Participation based on the latest audited financial statements for the last fiscal year. In the event that the party where the BPR makes Capital Participation experiences cumulative losses more than 50% (fifty percent) of the capital of the party where the BPR makes Capital Participation based on the latest audited financial statements for the last fiscal year.

Determined in Jakarta on January 10, 2024
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,
MAHENDRA SIREGAR

ANNEX III
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 1 OF 2024
CONCERNING
PRODUCTIVE ASSET QUALITY OF PEOPLE'S ECONOMIC BANKS

PEOPLE'S ECONOMIC BANK CREDIT POLICY GUIDELINES
TABLE OF CONTENTS
CHAPTER I .......................................................................................................... - 2 -
INTRODUCTION .......................................................................................... - 2 - A. BACKGROUND ......................................................................................................- 2 - B. FUNCTION AND OBJECTIVE OF BPR CREDIT POLICY (KPB)..................- 2 -

Function ......................................................................................... - 2 -
Objective......................................................................................... - 2 -
CHAPTER II ......................................................................................................... - 3 -
SCOPE OF KPB ............................................................................................ - 3 - A. MAIN POLICIES IN CREDIT.....................................................................................- 3 -
Prudence Principle in Credit...................................... - 3 -
Organization and Management of Credit....................................... - 6 -
Credit Approval Policy....................................................... - 9 -
Documentation and Administration of Credit........................................ - 11 -
Credit Supervision..................................................................... - 12 -
Handling of Problematic Credit ................................................. - 15 -
Implementation of Periodic Evaluation of Credit Policy
and Credit Procedures.......................................................... - 18 - B. TRANSPARENCY..........................................................................................................- 18 -
Information regarding Characteristics of Offered Credit......... - 18 -
Clarity regarding Credit Agreement Material and Collateral
Binding ..................................................................................... - 19 -

CHAPTER I
INTRODUCTION
A. BACKGROUND
Based on Law Number 7 of 1992 concerning Banking as amended several times, lastly with Law Number 4 of 2023 concerning Development and Strengthening of the Financial Sector (Banking Law), BPR is one type of bank with main activities of collecting funds and disbursing Credit. The disbursement of Credit is a business activity that is the main source of income for BPR to ensure the continuity of BPR's business, so BPR must maintain the quality of Credit by applying prudent principles and healthy credit principles so that the quality of Credit given remains normal. In the event that BPR is unable to maintain Credit quality well, this will affect BPR's performance, specifically financial performance, which can result in BPR's ability to meet obligations to depositing customers being disrupted. Therefore, in order for the application of prudent principles and healthy credit principles to be implemented consistently, BPR must have BPR Credit Policy (KPB) at least in accordance with the guidelines in this Annex. B. FUNCTION AND OBJECTIVE OF BPR CREDIT POLICY (KPB)

Function
In carrying out business activities, BPR must have an internal control system. To implement this internal control system, BPR must have policies, procedures, and organizational devices that have functional separation. One of the internal control systems that must be owned by BPR is the internal control system in credit, which is embodied in KPB. The aforementioned KPB has the function as:
a. a guideline for BPR in every implementation of activities in the credit field containing all aspects of credit that meet prudent principles and healthy credit principles, inter alia, in the process of granting Credit individually, monitoring the entire credit portfolio, and rescue and settlement of Credit; and b. a standard or measure in the implementation of supervision of Credit granting at all stages of the credit process individually.
Objective
BPR must have KPB with the objective:
a. applying prudent principles and healthy credit principles consistently and continuously to mitigate the risk of every Credit granting; b. preventing the abuse of authority by parties in the granting of Credit that can harm BPR; and
c. preventing the practice of granting unhealthy Credit.

CHAPTER II
SCOPE OF KPB
A. MAIN POLICIES IN CREDIT

Prudence Principle in Credit
The prudence principle in credit includes policies in Credit granting, Credit quality assessment, and the professionalism and integrity of BPR officials in the credit field. a. Policies in Credit Granting Policies in Credit granting cover main policies regarding the regulation of healthy Credit granting, collateral assessment, granting Credit to related parties with BPR, Group Debtors, and/or Large Debtors, Credit to economic sectors, business activities, and high-risk Debtors, and Credit that should be avoided.

Healthy Credit granting policies, at least covering:
a) healthy credit procedures and authorities including Credit analysis procedures, Credit approval procedures, Credit documentation and administration procedures, and Credit supervision procedures; b) Credit that needs special attention; c) procedures for handling problematic Credit consisting of Credit rescue and Credit settlement; and d) settlement of collateral already possessed by BPR obtained from the results of Credit settlement.
Collateral assessment policies, at least covering:
a) procedures and methods for assessing collateral from legal and economic aspects covering:
(1) collateral ownership documents;
(2) collateral binding;
(3) determination of collateral appraisal value; and (4) determination of the limit of collateral value amount against the amount of Credit to be given, with regard to changes in collateral value during the Credit period and risk mitigation in case of obstacles to executing collateral, inter alia, land ownership separated from building ownership on that land, which are both pledged separately. b) collateral that will be used as a factor to reduce PPKA is collateral that exists and is clearly present, and can be executed as regulated in this Financial Services Authority Regulation. Whereas collateral that does not exist and is not clearly present, and cannot be executed and cannot be used as a factor to reduce PPKA formation inter alia:
(1) collateral that has been used for public facilities that cannot be returned to function, for example, used as a public cemetery; (2) collateral in dispute; (3) collateral seized by the state; (4) collateral whose existence cannot be known, for example, vehicles whose physical body no longer exists; and/or (5) collateral that no longer has economic value due to certain reasons, for example, fire, accident, and others. c) Periodic assessment of collateral To obtain the latest value of collateral serving as Credit guarantee, BPR conducts periodic collateral assessment evaluations. The period of periodic evaluation is carried out according to the needs of each BPR, inter alia, considering the results of monitoring the condition of collateral and paying attention to the development of market prices of collateral in society. Periodic collateral assessment policies cover inter alia:
(1) Consistency of evaluation periods for collateral based on collateral type; and/or (2) Use of internal or independent appraisers to conduct collateral assessments.
Policies regarding granting Credit to related parties with BPR, Group Debtors, and/or Large Debtors at least covering:
a) the percentage of the maximum amount of Credit facilities provided to related parties with BPR, Group Debtors, and/or Large Debtors against the total amount of Credit or the total capital of BPR, based on the calculation of BPR's KPMM; b) the percentage of the maximum amount of Credit facilities provided to related parties with BPR, Group Debtors, and/or Large Debtors referring to Financial Services Authority Regulations regarding the maximum limit for granting credit to people's economic banks and the maximum limit for providing funds to sharia people's economic banks; c) granting Credit to related parties with BPR must be approved by at least 1 (one) member of the Board of Directors and 1 (one) member of the Board of Commissioners; d) granting Credit to Group Debtors, and/or Large Debtors, which will be syndicated and share risk (risk-sharing) with other banks must be approved by at least 1 (one) member of the Board of Directors; e) maintaining a list of names of related parties with BPR, Group Debtors, and/or Large Debtors to ensure the effectiveness of the application of the maximum limit for providing all Credit facilities provided by BPR to related parties with BPR, Group Debtors, and/or Large Debtors; and f) credit procedures approved by the Board of Directors must contain criteria for related parties with BPR and Group Debtors in accordance with Financial Services Authority Regulations regarding the maximum limit for granting credit to people's economic banks and the maximum limit for providing funds to sharia people's economic banks, as well as criteria for Large Debtors established by the Board of Directors.
Policies regarding granting Credit to economic sectors, business activities, and high-risk Debtors, inter alia, BPR must have a credit work unit or employees who have adequate competence in the business field to be financed.
Credit granting policies for debtors classified as politically exposed persons (PEP) must pay attention to regulations on anti-money laundering and counter-terrorism financing.
Granting Credit to economic sectors, business activities, and high-risk Debtors, inter alia:
a) commodities with highly fluctuating prices; b) economic sectors or business activities that are greatly influenced by external factors, for example, weather factors and others; c) economic sectors or business activities outside the expertise and ability of BPR; d) business locations located in certain areas, for example, conflict areas, riots, or disaster-prone areas; and/or e) Debtors classified as PEP in accordance with Financial Services Authority Regulations regarding the implementation of anti-money laundering and counter-terrorism financing programs in the financial services sector.
Policies regarding Credit that should be avoided, inter alia:
a) Credit for speculative purposes; b) Credit given without sufficient financial information except for Credit to micro businesses as long as there is certainty about the Debtor; c) Credit that requires special expertise not possessed by BPR; and/or d) Credit to problematic Debtors and/or Debtors who have Credit with loss quality at BPR or other banks. b. Credit Quality Assessment Policy Credit quality assessment policies must be in accordance with this Financial Services Authority Regulation, inter alia, BPR must establish the same Credit quality against several Credit accounts:
used to finance 1 (one) Debtor or 1 (one) project or the same business at the same BPR; and/or
given by more than 1 (one) BPR:
a. jointly used to finance 1 (one) Debtor or 1 (one) project or the same business based on a joint Credit agreement; and/or b. to finance 1 (one) Debtor or 1 (one) project or the same business that meets certain criteria in accordance with this Financial Services Authority Regulation. The definition of 1 (one) Debtor includes Credit facilities to husband and wife except in the event of a property separation agreement in accordance with applicable regulations.
c. Policies regarding Professionalism and Integrity of Credit Officials or Employees
All BPR officials or employees related to credit, including members of the Board of Directors and members of the Board of Commissioners of BPR, must at least:
carry out expertise professionally, honestly, objectively, carefully, and meticulously; and
have a commitment not to carry out acts as referred to in Article 49 paragraph (4) of the Banking Law.

Organization and Management of Credit
a. Policies regarding Credit Devices
Credit devices can be:

a unit or work unit for credit; or
employees,
who perform the function of granting Credit from application to disbursement, and Credit administration.
Employees who carry out Credit analysis must be different from employees who disburse Credit and Credit administration employees.
BPR forms a Credit Committee (KK) especially for BPRs that have Credit granted to related parties with BPR, Group Debtors, and/or Large Debtors and Debtors with high risk.
KK is tasked with assisting the Board of Directors in evaluating and/or deciding on Credit applications in accordance with the amount and type of Credit established by the Board of Directors. The number and membership of KK are established by the BPR Board of Directors in accordance with the needs of BPR, at least consisting of the Board of Directors and officials in the credit field. b. Policies regarding Duties, Authorities, and Responsibilities of the Board of Directors, Board of Commissioners, Credit Devices, and Credit Committee in the Credit Field BPR must clearly regulate the details of duties, authorities, and responsibilities of:
Board of Directors
Duties, authorities, and responsibilities of the Board of Directors related to credit at least cover:
a) being responsible for drafting KPB containing all aspects listed in the KPB Guidelines to be approved by the Board of Commissioners; b) approving credit procedures referring to the KPB approved by the Board of Commissioners; c) ensuring BPR's compliance with regulations in the credit field; d) ensuring that KPB is applied and implemented consistently and consistently; e) appointing KK members in the event KK formation is required; f) being responsible for drafting a business plan in the credit field embodied in the BPR business plan submitted to the Financial Services Authority in accordance with Financial Services Authority Regulations regarding the business plan of people's economic banks and sharia people's economic banks;

g) ensuring that the business plan in the field of lending is implemented;

h) ensuring the implementation of corrective measures for various deviations in lending found by the internal audit work unit or executive officials responsible for the implementation of the internal audit function;

i) reporting corrective measures that have been, are being, and will be carried out to the Board of Commissioners periodically and in writing, at least regarding:

(1) the development and quality of Credit as a whole;

(2) the development and quality of Credit granted to related parties, Group Debtors, and/or Large Debtors;

(3) Credit under special supervision and Non-Performing Credit;

(4) deviations in the implementation of Credit Policy;

(5) important findings in lending, including deviations or violations of regulations in the field of lending reported by the internal audit work unit or executive officials responsible for the implementation of the internal audit function;

(6) the implementation of the lending plan as outlined in the BPR business plan submitted to the Financial Services Authority in accordance with the Financial Services Authority Regulation regarding the business plan of rural banks and sharia rural financing banks;

(7) deviations or violations of regulations in the field of lending that are findings of external auditors and/or the Financial Services Authority; and

(8) the number and type of education and training for lending personnel,

j) establishing an education and training plan for employees handling lending and ensuring the implementation of such education and training in accordance with employee needs; and

k) establishing the form, duties, authorities, and responsibilities of lending personnel in accordance with BPR needs.

Board of Commissioners

The duties, authorities, and responsibilities of the Board of Commissioners related to lending at least include:

a) approving the BPR lending policy proposed by the Board of Directors;

b) approving the annual Credit granting plan, including to related parties with the BPR, which is formulated in the BPR business plan submitted to the Financial Services Authority in accordance with the Financial Services Authority Regulation regarding the business plan of rural banks and sharia rural financing banks;

c) supervising the implementation of the annual Credit granting plan as referred to in letter b);

d) requesting explanations and/or accountability from the Board of Directors and requesting corrective measures in the event that the implementation of Credit granting deviates from the lending plan that has been made;

e) requesting explanations and/or accountability from the Board of Directors regarding all aspects contained in the Credit Policy;

f) requesting explanations and/or accountability from the Board of Directors in the event of deviations in the implementation of the Credit Policy;

g) requesting explanations and/or accountability from the Board of Directors regarding the development and quality of the lending portfolio as a whole, including Credit granted to related parties with the BPR, Group Debtors, and/or Large Debtors, and other matters as referred to in Chapter II section A.1.a.3);

h) monitoring the planning and implementation of education and training for employees handling lending; and

i) reporting the results of supervision regarding the implementation of lending policies and lending procedures by the Board of Directors to the Financial Services Authority in the business plan supervision report of the BPR as referred to in the Financial Services Authority Regulation regarding the business plan of rural banks and sharia rural financing banks.

Lending Personnel

The duties, authorities, and responsibilities of every employee of the lending personnel at least include:

a) complying with all provisions established in the Credit Policy and lending procedures;

b) carrying out duties honestly, objectively, carefully, and meticulously without influence from parties interested in the Credit applicant or other parties that could harm the BPR;

c) continuously improving abilities and knowledge in the field of lending, including abilities and knowledge regarding the economic sector, business activities, and/or high-risk debtors that have been and will be financed by the BPR; and

d) rejecting Credit applications submitted if they do not meet the requirements in the lending procedures.

Credit Committee

The duties, authorities, and responsibilities of the Credit Committee from the lending personnel at least include:

a) providing recommendations for the approval or rejection of Credit in accordance with authority limits or types of Credit, including by considering liquidity aspects;

b) obeying and following all established lending policies and lending procedures;

c) carrying out duties primarily in connection with granting Credit approval professionally, honestly, objectively, carefully, meticulously, and independently without being influenced by any party; and

d) providing recommendations for Credit approval or rejection to the Board of Directors along with the considerations.

BPR may expand the scope of functions, duties, authorities, and responsibilities as mentioned above in accordance with BPR needs, provided they do not contradict the functions, duties, authorities, and responsibilities established in this Credit Policy.

Credit Approval Policy

The Credit approval policy at least includes the concept of the total relationship with the Credit applicant, the establishment of Credit approval authority limits, the responsibilities of the Credit decision-making official, the Credit approval process, the Credit agreement, and the Credit disbursement approval.

a. Concept of Total Relationship with Credit Applicant

The approval of Credit granting must not only be based on the consideration of an application for 1 (one) transaction or 1 (one) Credit account from the applicant, but must be based on a comprehensive assessment of all Credit facilities that have been granted or will be granted simultaneously to the said Credit applicant, known as the concept of the total relationship with the Credit applicant.

The definition of Credit applicant includes all individual persons, companies, and/or parties related to the Credit applicant who have received Credit facilities or will be granted Credit simultaneously by the BPR.

The approval of Credit granting based on the concept of the total relationship with the Credit applicant must be reflected in the Credit analysis.

b. Establishment of Credit Approval Authority Limits

The regulation of Credit approval authority limits at least includes:

the basis for consideration and criteria for regulating Credit approval authority limits are formulated in writing in the Board of Directors' decision, including ceiling amounts, Debtor criteria such as connection with the BPR, classified as high-risk Debtors, Politically Exposed Persons (PEPs), Group Debtors, and others, as well as the level of employee positions appointed;
the stages of the Credit approval process;
every Credit granting must obtain approval from the official authorized to make the Credit decision;
every Credit approval must be done in writing;
signing the Credit agreement; and
approval of Credit disbursement.

c. Responsibilities of the Credit Decision-Making Official

The responsibilities of the Credit decision-making official at least include:

ensuring that every Credit granted has met banking regulations and is in accordance with prudent principles and the principles of healthy lending;
ensuring that the implementation of Credit granting is in accordance with the Credit Policy and lending procedures;
ensuring that Credit granting is based on honest, objective, careful, and meticulous assessment and is free from the influence of parties interested in the Credit applicant or other parties that could harm the BPR; and
believing that the Credit to be granted can be repaid upon maturity based on analysis of the submitted application.

d. Credit Approval Process

Credit Application

In assessing a Credit application, the BPR must pay attention to:

a) the Credit application is submitted in writing, both for new Credit and Credit Restructuring;

b) the Credit application as referred to in letter a) must contain complete information and meet requirements in accordance with provisions established in the lending procedures, including lending history at the BPR, commercial banks, and/or other financial institutions; and

c) data, information, and documents submitted in the Credit application must be verified to ensure completeness and accuracy. Credit application documents at least include:

(1) documents related to the Debtor, such as Debtor identity documents, Family Cards, Taxpayer Identification Numbers (NPWP), business legality documents;

(2) Debtor financial information; and

(3) documents related to collateral and its encumbrances.

Credit Analysis

Every Credit application that meets the requirements must undergo written analysis, paying attention to:

a) the form, format, and Credit analysis are adjusted to the amount and type of Credit;

b) the Credit analysis must reflect the concept of the total relationship with the Credit applicant in the event the applicant has received Credit facilities or is simultaneously submitting other Credit applications;

c) the Credit analysis must be made completely, accurately, and objectively, at least including:

(1) information related to the project or business and applicant data, including results from the Financial Services Information System (SLIK);

(2) assessment of the appropriateness of the Credit application amount with the project or business to be financed, to avoid the possibility of inflation (mark-up) practices that could harm the BPR; and

(3) objective assessment not influenced by parties interested in the Credit applicant. Credit analysis must not merely be a formality performed to fulfill lending procedures;

d) included in the scope of credit analysis is ensuring that the amount of Credit applied for and proposed is in accordance with the Financial Services Authority Regulation regarding the maximum limit for granting credit to rural banks and the maximum limit for providing funds to sharia rural financing banks;

e) credit analysis at least includes assessment of the Debtor's character (character), capacity (capacity), capital (capital), collateral (collateral), and business prospects (condition of economy), or better known as the 5 C's, and assessment of the Credit repayment source focused on business results or income sources related to the object financed by the BPR, and presents an evaluation of legal lending aspects to protect the BPR from potential risks; and

f) in syndicated Credit, the Credit analysis for the BPR as a syndicate participant must include assessment of the bank acting as the syndicate coordinator. In the event the BPR acts as the syndicate coordinator, the BPR must assess the syndicate participant banks.

Credit Approval Recommendation

The Credit approval recommendation must be prepared in writing based on the results of the Credit analysis that has been conducted. The content of the Credit approval recommendation must align with the conclusions of the Credit analysis.

Granting of Credit Approval

a) Every granting of Credit approval must pay attention to the analysis and Credit approval recommendation.

b) Every granting of Credit approval that differs from the content of the Credit approval recommendation must be explained in writing.

e. Credit Agreement

Every Credit that has been approved must be formulated in a written Credit agreement, with the substance of the agreement known and understood by both parties. The form, format, and content of the Credit agreement are established by the BPR at least:

meeting validity and legal requirements that can protect the interests of the BPR and the Debtor;
containing the amount, tenure, interest rate, purpose of use, method of Credit repayment, and other Credit requirements as established in the approval decision for said Credit; and
the Credit agreement is made in at least 2 (two) copies, one of which is delivered to the Debtor.

f. Credit Disbursement Approval

Disbursement of approved Credit must be based on:

Credit disbursement is only approved if all conditions established in the Credit granting approval letter and Credit agreement have been met by the Credit applicant.
Before Credit disbursement is carried out, it must be ensured that all legal aspects related to the Credit have been resolved and have provided adequate protection for both the BPR and the Debtor.

Credit Documentation and Administration

a. Credit Documentation

Documentation is one of the important aspects in the lending process, so Credit documents must be documented well and orderly in accordance with statutory regulations.

Types of Credit Documents

Credit documents are all documents required in the framework of Credit disbursement, which serve as evidence of agreement or legal binding between the BPR and the Debtor, evidence of ownership of collateral goods, and other lending documents that are legal acts and/or may have legal consequences.

The types of credit documents to be documented are adjusted to the Credit granted, including Credit application documents, Credit analysis documents, Credit agreements, and Credit disbursement warrants.

Storage and Use of Credit Documents

Every Credit document must be stored safely and orderly in accordance with statutory regulations regarding company documents. The method of use or retrieval of Credit documents from storage must be ensured to have adequate security.

b. Credit Administration

Credit administration is very necessary for assessing the development and quality of Credit, Credit supervision, protection of BPR interests, and reporting to the Financial Services Authority, so all accounting and administration of the lending process must be regulated well and orderly.

Credit Accounting

All Credit granted by the BPR must be recorded and booked correctly, completely, and accurately, covering all necessary information.

Credit Administration Procedures

Credit administration procedures must include elements in the internal control system, at least including:

a) establishment of lending personnel responsible for lending administration;

b) types of documents to be accounted for, at least including:

(1) Credit application documents, including documents related to collateral and its encumbrances;

(2) Credit analysis documents;

(3) Credit agreements;

(4) Credit disbursement warrants;

(5) documents related to the Debtor; and

(6) documents related to collateral and its encumbrances, and

c) methods of document accounting, including document codification, and document retention periods in accordance with statutory regulations.

Credit Supervision

a. Principles of Credit Supervision

Lending is one of the business activities of BPR that carries risks that can harm the BPR, the interests of depositors, and users of banking services, so the Credit supervision function needs to be applied comprehensively by paying attention to:

The Credit supervision function must begin with early prevention efforts against the possibility of unhealthy Credit granting practices and/or other matters that can harm the BPR.

This must be reflected in the BPR's internal control system related to lending, which at least consists of lending organization and management, lending policies and procedures, and information systems in the field of lending.

The existence of a mechanism that any violation of the Credit Policy and Credit implementation procedures can be immediately known and reported to the authorized official, Board of Directors, and/or Board of Commissioners.
The existence of sufficient opportunity for the supervised party to provide explanations regarding the background of the problem and input as a solution for the future.
Credit supervision includes:

a) daily supervision by the Board of Directors and/or officials handling lending hierarchically over every implementation of Credit granting, commonly known as embedded supervision; and

b) supervision conducted by the internal audit work unit or executive officials responsible for the implementation of the internal audit function regarding all aspects of lending, including review of lending policies and procedures, as well as lending organization and management.

b. Objects of Credit Supervision

Credit supervision must include all aspects of lending and all supervision objects without exception, namely:

Supervision regarding the implementation of lending policies and Credit granting procedures, as well as BPR officials or employees related to lending.
Supervision regarding all types of Credit and Debtors, especially Credit to related parties with the BPR, Group Debtors, and/or Large Debtors. Supervision of these parties must be conducted intensively.

c. Scope of Credit Supervision

Credit supervision at least includes:

Regarding BPR Internally:

a) Monitoring and supervising the suitability of Credit granting and collection processes with policies, procedures, and statutory regulations.

b) Ensuring that the amount of Credit granted does not violate or exceed the Maximum Credit Limit (BMPK) in accordance with Financial Services Authority Regulations regulating the maximum limit for granting credit to rural banks and the maximum limit for providing funds to sharia rural financing banks.

c) Monitoring and supervising the suitability of handling Non-Performing Credit (Credit Restructuring, write-off, write-off of receivables, and collateral takeover) with the Credit Policy and statutory regulations.

d) Monitoring the suitability of the implementation of accounting and administration of lending documents with statutory regulations.

e) Monitoring the determination of Credit quality and the adequacy of the amount of asset quality provision reserves in the form of Credit in accordance with this Financial Services Authority Regulation.

f) Giving early warnings to work units or related employees in the event that the Credit quality of a Debtor or the entire Credit portfolio in the work unit or employee is potentially declining.

g) Evaluating the suitability of the determination of employees occupying positions in the lending field with their competencies.

h) Supervising the behavior of lending employees and reporting to superiors, the Board of Directors, and/or the Board of Commissioners in the event of violations or deviations committed by lending employees.

i) Evaluating lending policies, procedures, organization, and management comprehensively.

Regarding BPR Externally:

a) Supervising the use of Credit in accordance with the purpose of use as stated in the Credit agreement.

b) Monitoring the development of the Debtor's business and repayment ability, including monitoring through business site and collateral visits to the Debtor at any time based on criteria such as the amount of Credit facilities, type of Debtor, type of project or business, and/or Credit quality.

c) Providing written early warnings to the Debtor in the event of a decline in the quality of the Debtor's Credit assessed as posing a risk to the BPR.

d) Monitoring the economic development and business competition of the Debtor, especially Debtors with economic sectors, business activities, and high-risk Debtors.

d. Internal Audit of Lending

The internal audit function is to monitor the performance of the internal control system and ensure that the implementation of lending has been done correctly and in accordance with the Credit Policy, and has met the scope of Credit supervision principles accompanied by corrective actions or recommendations.

Implementation of internal audit regarding lending to verify:

Credit granting has been implemented in accordance with the Credit Policy, Credit granting procedures, BPR internal regulations, and statutory regulations;
Credit quality and the adequacy of the amount of Credit write-off reserves are in accordance with this Financial Services Authority Regulation;
Credit granting to related parties with the BPR, Group Debtors, and/or Large Debtors is in accordance with the Credit Policy and Financial Services Authority Regulations regarding the maximum limit for granting credit to rural banks and the maximum limit for providing funds to sharia rural financing banks;
monitoring the implementation of accounting and administration of lending documents in accordance with statutory regulations; and
handling of Non-Performing Credit, namely Credit Restructuring, write-off, write-off of receivables, and collateral takeover, is in accordance with the Credit Policy and statutory regulations.

Handling of Non-Performing Credit

BPR must detect the existence of Non-Performing Credit or Credit potentially becoming Non-Performing Credit and handle Non-Performing Credit as soon as possible.

a. Principles of Handling Non-Performing Credit

All BPR employees, especially those related to lending, must have the same understanding in handling Non-Performing Credit, by making efforts as follows:

handling of Non-Performing Credit is carried out, among others, by more intensive guidance to Debtors with Non-Performing Credit and Credit potentially becoming problematic;
information regarding Non-Performing Credit must be clearly disclosed in Credit documentation and administration for follow-up handling internally in the BPR and submitted to the Board of Commissioners to become material in the Board of Commissioners' supervision report of the BPR business plan to the Financial Services Authority;
information as referred to in item 2) at least includes the main causes of Non-Performing Credit, the development of Non-Performing Credit, the development of handling Non-Performing Credit, and follow-up handling of Non-Performing Credit, especially those having a significant impact on BPR performance;
BPR does not make exceptions in handling Non-Performing Credit, especially for Non-Performing Credit to related parties with the BPR, Group Debtors, and/or Large Debtors; and
BPR does not settle Non-Performing Credit by increasing the Credit ceiling or interest arrears and capitalizing such interest arrears without analysis of Debtor viability and adequate documentation.

b. Formulation of Non-Performing Credit Handling Program

The Non-Performing Credit handling program must be approved by the Board of Directors and formulated as early as possible before impacting the overall lending performance of the BPR. The Non-Performing Credit handling program includes at least:

handling procedures for each Non-Performing Credit in accordance with this Financial Services Authority Regulation as well as BPR policies and procedures regarding the rescue and settlement of Non-Performing Credit;
estimated time for settlement;
estimated results of rescue or settlement of Non-Performing Credit, both from the side of Credit repayment and from the side of Credit quality; and
Prioritize the handling of Problematic Loans to related parties of the BPR, Group Debtors, and/or Large Debtors.

The handling program for Problematic Loans is one of the materials that must be reported in the supervision report of the business plan as referred to in Chapter II item A.2.b.2).i).

c. Efforts to Handle Problematic Loans

In formulating a program to handle Problematic Loans, BPRs may undertake the following efforts:

Credit Restructuring

Criteria for Credits that can be restructured must meet at least:
a) The Debtor experiences difficulties in paying the principal and/or interest of the Credit; and b) The Debtor has a good business prospect and is assessed to be able to fulfill obligations after the Credit is restructured;

Credit Restructuring Policy must cover at least:
a) The Board of Directors must form a working unit or appoint officials or employees to handle Credit Restructuring; b) Officials or employees assigned to the working unit or appointed to handle Credit Restructuring must not be involved in the Credit granting process to the Debtor whose Credit will be restructured; c) In the event that the BPR does not have a sufficient number of employees, this authority may be exercised by the Board of Directors; d) Determination of the authority limit to decide on restructured Credits, regulated in the credit procedures; e) The progress of handling restructured Credits must be reported periodically by the working unit or appointed officials or employees to the Board of Directors and/or Board of Commissioners; f) The rights and obligations of the Debtor and other requirements for Credit Restructuring must be stated in a written change (addendum) to the Credit agreement; and g) The implementation of Credit Restructuring needs to consider the need to adjust the BPR's Credit with the projection of the Debtor's repayment ability after Credit Restructuring.

Resolution of Problematic Loans

For Problematic Loans that cannot be recovered after rescue efforts have been made, such Problematic Loans may be resolved with the following provisions:

The Board of Directors of the BPR formulates policies for resolving Problematic Loans, which are stated in the credit procedures and are responsible for their implementation.

a) BPRs must choose one of the treatments for resolving Problematic Loans, consisting of:

resolution of Credit through the takeover of AYDA; or
the Credit resolution process.

The resolution of Problematic Loans is carried out in accordance with this Financial Services Authority Regulation and BPR accounting guidelines.
The basis for consideration in choosing the treatment for resolving Problematic Loans must be documented in writing.

b) To determine the treatment as referred to in letter a), BPRs must consider:

the legality of the collateral;
the type of collateral;
the good and marketable market value of the collateral;
the comparison of the collateral value to the Debtor's obligations (coverage); and
a statement of surrender of collateral or a power of attorney to sell from the Debtor.

c) Procedures for resolving Credit through the takeover of AYDA as referred to in item 1).a) are supplemented with:

Procedures and time limits for the disbursement of AYDA, including the determination by the Board of Directors or appointed officials for the disbursement of AYDA, as well as the preparation of an action plan for the disbursement of AYDA in accordance with this Financial Services Authority Regulation.
Procedures and periods for the valuation of AYDA, including periodic valuation of AYDA.
The period for periodic re-evaluation is carried out according to the needs of each BPR, paying attention to among other things:
(1) Evaluation periods for AYDA based on the type of collateral; and/or (2) The use of internal or independent appraisers to conduct collateral valuations.
Application of AYDA accounting treatment, including differences in returns to the Debtor in accordance with this Financial Services Authority Regulation as well as BPR credit policies and procedures.
Periodic re-evaluation of AYDA in accordance with this Financial Services Authority Regulation and BPR accounting guidelines.
Documentation and administration of the resolution of Problematic Loans.

d) Procedures for resolving Problematic Loans through the Credit resolution process as referred to in item a).2) are carried out in accordance with BPR accounting guidelines.

e) Procedures for notifying the Debtor regarding the resolution of Problematic Loans through the takeover of AYDA.

d. Write-off and/or Write-off of Receivables

In carrying out write-off and/or write-off of receivables for Credits with bad quality, BPRs must pay attention to the following provisions:

Write-off can only be carried out against Credits that have bad quality.
Plans for write-off of Credits with bad quality in significant amounts must be recorded in the BPR's business plan.
The implementation of write-off and/or write-off of receivables is adjusted to the authorities contained in the BPR's credit policy and credit procedures.
Write-off of bad Credits can be carried out in the event that:
a) the debtor has no prospect for restructuring or Credit Restructuring efforts have failed so that the BPR's credit portfolio remains bad; b) the collateral controlled by the BPR is insufficient to pay off the credit; and c) the BPR has formed a sufficient PPKA (Credit Problem Handling Unit).
Write-off cannot be carried out against part of a Credit (partial write-off).
Write-off and/or write-off of receivables can only be carried out after the BPR has made efforts to recover the Credit granted.
Write-off of bad Credits is carried out based on good faith, considering fairness, and without conflict of interest.
BPRs must document the efforts made and the basis for consideration for the implementation of write-off and/or write-off of receivables.
BPRs must administer data and information regarding Credits that have been written off and/or written off of receivables.

Implementation of Periodic Evaluation of Credit Policies and Credit Procedures

To assess the adequacy and effectiveness of the Credit granting process, BPRs carry out periodic evaluations of credit policies and credit procedures. The period for implementation of evaluation is carried out according to the needs of each BPR, paying attention to among other things:
a. Issuance of the latest regulatory provisions; b. BPR's strategy and business plan; and/or
c. Current condition of the BPR.

B. TRANSPARENCY

In the application of corporate governance, BPRs must apply transparency of information regarding each type of Credit to be offered to Debtors or prospective Debtors adequately, clearly, accurately, and comparably between products according to the rights and needs of the Debtor or prospective Debtor.

The information provided must be easy and understandable for Debtors and must cover at least:

Information on Characteristics of Offered Credits

Information on the characteristics of offered Credits must cover at least:
a. product name; b. benefits and risks of the Credit offered to the Debtor or prospective Debtor in full, specifically the risks that will arise if the Debtor or prospective Debtor cannot fulfill obligations as stated in the Credit agreement, including among others the imposition of penalties, takeover of collateral, and others;
c. Credit requirements covering among other things required documents, mechanisms, Credit application procedures, and collateral requirements;
d. attached costs to be charged to the Debtor, including among others administrative fees, commissions, penalties, and insurance, so that the Debtor obtains clarity regarding costs to be charged and has confidence in the ability and willingness to fulfill obligations to the BPR; e. information on interest rates covering at least the calculation method, calculation manner, charging, and adjustment of Credit interest rates according to market interest rates. The calculation method of interest must be supplemented with an estimate or simulation of interest to be charged to the Debtor during the Credit period; and f. the duration of each offered product and the installment schedule.

Information on product characteristics as referred to in letters a through f must be provided by the BPR to the Debtor or prospective Debtor before the signing of the Credit agreement.

Clarity regarding Credit Agreement Materials and Collateral Binding

Before the signing of the Credit agreement, the BPR must inform the prospective Debtor transparently, completely, and clearly regarding the form and content of the Credit agreement and the collateral binding agreement.

This copy is in accordance with the original
Legal Director 1
Legal Department
Mufli Asmawidjaja

Determined in Jakarta on January 10, 2024

CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,

MAHENDRA SIREGAR

s s

Financial Services Authority Regulation Number 1 of 2024 Concerning the Asset Quality of Rural Economic Banks

Lineage: In force