27 March 2020 (closed)
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A company that wishes to obtain a foreign loan in foreign currency of more than USD 100,000 is required to fulfill certain requirements set by Bank Indonesia (BI). These requirements are set in BI Regulation 16/21/PBI/2014 concerning The Implementation Of Prudential Principles in Managing External Debt of Non-Bank Corporation and amendment 18/4/PBI/2016 (BI Regulation). Further explanation is provided in the BI Circular number 16/24/DKEM of 2014 and its amendment number 17/18/DKEM of 2015. In this column we will discuss the reporting requirements for foreign loans of more than USD 100,000.
Reporting Requirements Foreign Loan
A loan from abroad can be either in foreign currency or Rupiah. In case of such foreign loan in foreign currency, the local company is required to implement the Prudential Principles set by BI, which include:
- a hedging ratio of minimum 25% of
- the negative balance between Foreign Currency Assets and Foreign Currency Liabilities with a maturity period of up to 3 (three) months from the end of the quarter; and
- the negative balance between Foreign Currency Assets and Foreign Currency Liabilities with a maturity period of between 3 (three) and 6 (six) months from the end of the quarter.
Non-Bank Corporation that record financial statements in United States Dollars and fulfill specific criteria are exempt from the minimum Hedging Ratio. The hedging ratio requirement is in force since January 1, 2017.
- Liquidity Ratio: a PT PMA holding a loan in a Foreign Currency is required to fulfill a minimum Liquidity Ratio of 70% by providing adequate Foreign Currency assets to meet Foreign Currency liabilities that shall mature within 3 (three) months from the end of the quarter. The liquidity ratio requirement is in force since January 1, 2016.
- Credit Rating: The foreign currency borrower is required to maintain a BB rating from an accredited Indonesian ratings agency. The credit ratio requirement is in force since January 1, 2017.
The implementation of the Precautionary Principles through a Precautionary Principle Report (Kegiatan Penerapan Prinsip Kehati-hatian (KPPK Report)) must be reported to BI on quarterly basis.
Sanctions in Case of Non-Compliance of Foreign Loan Reporting Requirements
The BI Regulation regulates the following sanctions for violations of the Hedging Ratio, the Liquidity Ratio or the Credit Rating and violations in the submission of the KPPK report:
- Sanctions in case of violation of the Hedging Ratio, the Liquidity Ratio or the Credit Rating:
- Written warning
- Bank Indonesia shall submit information concerning the imposition of administrative sanctions to relevant parties, including:
- the international creditors involved;
- The Ministry of State Enterprises, applicable to state-owned enterprises;
- The Ministry of Finance, c.q. Directorate-General for Taxation;
- The Financial Services Authority (OJK); and
- The Indonesia Stock Exchange, applicable to corporations listed on the Indonesia Stock Exchange
- Sanctions in case of violations of regulations with regard to the KPPK report:
- 500.000 for each incomplete and/or incorrect report
- Warning letter and/or notification to the competent authority in case the report is not or too late submitted
- 500.000 per day, up to a maximum of Rp. 5.000.000 for late submission
- 10.000.000 if no report is submitted
This column is provided by PNB Law Firm Jakarta