REPUBLIKA.CO.ID, JAKARTA -- Banking analysts saw that banking companies in Indonesia should carry out consolidation process. Financial Services Authority (OJK) encouraged small banks, especially in category of BUKU I to divest in order to become stronger and healthier. Indonesia has more than 120 commercial banks, consisted of local, foreign and foreign joint venture banks.

"It could be consolidated into 80 banks," Senior Economist of Standard Chartered Bank, Fauzi Ichsan said on Wednesday as reported by Satya Festiani.

Consolidation process can be carried out through merger process and capital injection. In merger process, it needs more efforts as the problem is, foreign bank is difficult to acquire private bank, for example, bank that is owned by a family.

Political resistance is also an obstacle in merger process. The reason, investors will think twice before buying PT Bank Mutiara (former Century Bank). They also saw the failure of merger process between PT Bank Danamon Indonesia and DBS Group caused political reasons.

Capital injection is the second thing that can be conducted in consolidation process. Ichsan said that banking capital in Indonesia was relatively small compared to Singapore and Malaysia. Basel III regulation can encourage a bank to boost its capital. However, merger process is more recommended.