BANKING SECTOR IN INDONESIA

Banking sector in Indonesia was meet many conditions.For example,While the 1997 Asian financial crisis is now a distant memory, the scars inflicted by the crisis ensured that Indonesian banks have become more prudent in managing their capital requirements. Likewise, analysts have placed more scrutiny on key risk and leverage ratios, specifically the capital adequacy ratio (CAR) and the more stringent core capital to risk-weighted assets ratio as outlined by the Basel II banking risk management framework. Present data suggest that the aggregate CAR for Indonesias banks is well over the 8% minimum recommended by Basel II. Aggregate commercial banks CAR approached 17.41% in September 2012 while its associated core capital to risk-weighted assets ratio stood at 16.54%. The capital ratios of Indonesian banks improved sharply to 18.41% during January 2012, which was attributable to lower growth of risk weighted assets held by Indonesian commercial banks since the beginning of 2012. Foreign-owned banks and non-foreign exchange commercial banks, most notably, saw a CAR of 27.42% and 21.55% respectively, or a core capital to risk-weighted asset ratio of 26.40% and 19.60% respectively during September 2012. The recent ruling from Bank Indonesia (BI) on Nov. 23 can be seen as its move to be more conservative toward foreign banks. The central bank wants to ensure balance both internally as well as externally.Internally, BIs recent ruling is an effort to balance excessive growth in the consumer-related sectors, such as the motorcycle and automobile sectors, with the more inclusive segments, such as the small and medium enterprises (SMEs) segment. BI has put the brakes on the fast growing automobile/motorcycle financing segment by introducing a loan-to-value ratio of 70 percent and setting the required minimum down payment to 25 percent for two-wheelers and 30 percent for four-wheelers. At the same time, it also obliges 20 percent of loan portfolios to be distributed to SMEs. And for the first time in eight year, Islamic Finance News (IFN) awards Bank Indonesia (BI) as the best central bank in promoting Islamic finance. BI successfully steals the title from Bank Negara Malaysia (BNM)."Alhamdulillah, we finally beat Malaysia," Executive Director of Islamic Banking Department at BI, Edy Setiadi, said on Friday. BI has significantly made progress in boosting the development of Islamic finance with its conducive regulation, particularly promoting Indonesia's retail banking sector. "This is the biggest portion. The number of bank accounts has reached 13 millions," Setiadi said.Indonesia also made an impressive Islamic finance growth projection of 40 percent per year. Setiadi hopes the award will encourage BI to boost Islamic finance in Indonesia. "This would be impossible without supports from all stake holders," he said.

Indonesia need to develop sharia system not only the banking sector, Suhartono, a commissioner of a sharia bank PT Bank BCA Syariah, said on Saturday. Sharia banking business has flourished in this predominantly Muslim country.Sharia banking industry was first introduced in the country by the Association of Indonesia Muslim Intellectuals (ICMI) by establishing Bank Muamalat around two decades ago. Sharia banking is based on sharia law, giving and accepting no interest, and banning financing gambling and alcohol related business. Sharia bank depositors or investors earn from gain under profit sharing venture. If seen by former information we can get answer that Indonesias banking sector have fluctuation every period.And Indonesia need to develop islamic finance like sharia banking sector.This sector have a good prospects.Indonesia is the largest muslim people in the world,and if we develop islamic finance with sharia banking sector,its good to grow Indonesia economic.