The regulations provide six exception for foreigner to get credit from Indonesian Bank

For the last few decades, Indonesia becomes more open to foreigners who are coming to Indonesia, either for business or non-business purpose. Well, “Open” does not automatically mean totally free for foreigners, because the Government of Indonesia strictly sets out some limitations and prohibitions.

In banking sector, Bank Indonesia issued Regulation Number 7/14/PBI/2005 (“Regulation 7/2005”) which stipulates a list of forbidden bank transaction for foreign parties. In Regulation 7/2005, the term “foreign parties” is defined as foreign citizen, foreign legal entity or other foreign entities, Indonesian citizen who holds permanent resident status in another country and not living in Indonesia, offshore representative office of an Indonesia-based bank, and offshore representative office of a company registered in Indonesia.

Regulation 7/2005 which has been amended twice by Regulation Number 14/10/PBI/2012 and Regulation Number 16/9/PBI/2014, specifies 8 (eight) types of transactions that are forbidden to be conducted between bank and foreign parties. Those transactions are (1) Credit in Rupiah or foreign currency; (2) Vostro in Rupiah; (3) Purchase of securities in Rupiah issued by foreign party; (4) inter-office invoice in Rupiah;

(5) Inter-office invoice in foreign exchange for offshore loan; (6) Capital subscription in Rupiah; (7) Fund transfer in Rupiah to an account owned by foreigner or joint account between foreigner and non-foreigner in domestic bank; (8) Fund transfer in Rupiah to an account owned by foreigner or joint account between foreigner and non-foreigner in offshore bank or fund transfer in Rupiah to an account owned by not foreigner in offshore location.

Not all types of credit transactions are prohibited for foreign parties. Article 9 of Regulation 7/2005 sets out some exceptions. Foreign parties are allowed to have certain types of credit from the bank, as long as they meet conditions as follows: (a) Credit in syndication form that meets the following requirements; It is involving prime bank as the lead bank; It is granted for project financing in real sector for productive enterprises in Indonesia; It is the contribution of foreign bank as the syndication member is bigger than the contribution of local bank;

(b) Credit card; (c) Credit for local consumption; (d) Temporary overdraft in Rupiah and foreign exchange supported by authenticated documents that confirm the fund transfer in the same day based on the determined requirements as stipulated by Bank Indonesia’s circular letter; (e) Overdraft in Rupiah and foreign exchange as a cause of administration fee; (f) Invoice taking over from the institution appointed by the Government to manage bank assets for national bank restructuring by foreign parties which its payment is guaranteed by prime bank.

Apart from Regulation 7/2005, there is another option for individual foreigner to ‘have’ credit. The option is to marry Indonesian citizen. Based on the concept of community property as regulated by Law Number 1 of 1974 on Marriage, a credit transaction which is done by Indonesian citizen who married with foreigner (mix marriage) is considered as the joined assets of both parties as long as there is no prenuptial or postnuptial agreement that includes the separation of joined assets.

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