REPUBLIKA.CO.ID, JAKARTA -- Bank Indonesia has relaxed regulation on down payment for houses acquired with credits. BI has given banks freedom to set their loan to value (LTV) ratio for the purchase of first house.

Banks are no longer bound by the regulation on the amount of down payment to be paid by their clients buying houses by credits. Banks are free to set the amount of the down payment including 0 percent advance payment depending on the risk to be faced by the bank management.

"We offer relaxation in regulation on first time buyer not 0 percent advance payment. We leave it to the bank management," Deputy Governor of Bank Indonesia Erwin Rijanto in a news conference here on Friday.

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Before the revision of the LTV regulation, the Central Bank regulated the LTV ratio for house with a floor space of 70 meters at 85 percent of the total value of the house. Under the previous regulation house buyers needed to pay down payment 15 percent of the real value of the house, but now there is no more LTV ratio.

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Erwin, however said not all banks could utilize the scrapping of LTV. The relaxation is given only to banks with non performing loan of less than 5 percent net. The LTV regulation was to cope with the threat of growing NPL to exceed the maximum level considered safe by the central bank.

Bank Indonesia Governor Perry Warjiyo said he was confident the new regulation giving banks freedom to set down payment would not endanger the country's economy especially the banking industry as a result of possible increase in NPL.

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