PT Bosowa Corporation

"We see good prospects for the business in the future as cement demand for infrastructure projects is growing," Krishna said. "Their cash flow is also getting better as they have improved their storage facilities in Java and Sumatra, where demand is robust," he said. Publicly listed BNI will also allow Semen Bosowa to settle its entire debt before 2015, should its performance be better than expected.

Semen Bosowa is owned by businessman-turned-politician Aksa Mahmud, the brother-in-law and close confidant of Vice President Jusuf Kalla. The companys bad loans have long dominated BNI’s non-performing loans (NPL) portfolio, being the largest of the banks top 10 bad debts. Its outstanding loans to BNI now total Rp 584 billion (US$63.8 million), comprising almost 30 percent of the lenders total bad loans of Rp 2.09 trillion. BNI, along with two other        state controlled banks, Bank Mandiri and Bank Tabungan Negara, channeled syndicated loans worth Rp 1.2 trillion to Semen Bosowa’s parent Bosowa Group in 1996. After the 1997 financial crisis the Group defaulted on its debts.

With the debt being resolved, Krishna was upbeat the firm would be able pay 50 percent of its loans to BNI by the end of the year. Krishna hoped BNI would be able to meet its target of suppressing its NPL below 5 percent this year. As of June this year, the banks NPL has declined to 7.4 percent from 9 percent a year earlier. The NPL ratio is an indicator of a banks health, especially its prudence in channeling loans to borrowers.