The Ministry of Finance is preparing a government regulation that will enable state-owned banks to write off bad loans owed by small-and-medium sized enterprises (SMEs) in an effort to accelerate the recovery of their businesses, a government official said.
Director General of State Auction and Credit at the ministry Machfud Sidik said the government would wrap up the regulation within the first 100 days of the new government, with a possible disposal of the loan collateral assets to start early next year.
"The regulation will outline guidelines for the government in writing off the debts. There will be a strict criteria imposed on the facility in a bid to avoid misuse," said Machfud on Thursday.
Machfud explained that the write-off measure would only be eligible for individual debts of up to Rp 10bn (about US$1.09m), and the SME debtors could no longer service the debts despite an earlier discount facility from the government.
