JAKARTA, Oct 23 ― Indonesia's PT Bank Mandiri Tbk will raise its provisions to 18-20 trillion rupiah (RM5.85-RM6.27 billion) for 2016 from 11 trillion rupiah a year earlier, as bad loans spread beyond the commodities sector, its CEO told Reuters today.

Non-performing loans rose to 3.86 per cent of total lending at the end of the second quarter, from 2.43 per cent a year ago, and will likely start recovering significantly only towards the end of 2017, said Kartika Wirjoatmodjo, CEO of Indonesia's biggest bank by assets.

"In the next two, three, four quarters, our provisions would indeed be quite big,” Wirjoatmodjo said on the sidelines of a Mandiri event. "For existing creditors who have a high level of debt, their cash flow is not enough yet to repay it.”

Mandiri is "proactively” restructuring loans that it considers to be at the risk of default, and expects provisions to dip to 14-16 trillion rupiah next year, said Wirjoatmodjo, a former CEO of Indonesia Deposit Insurance Corp.

Bad loans in Indonesia's mining sector nearly doubled in July from a year earlier, data from the financial regulator showed, as sluggish demand and oversupply hurt the ability of miners of commodities ranging from coal to copper to service their debt.

Debt woes have extended to other sectors, including consumer and property, Wirjoatmodjo said, adding that mid-sized businesses now appear more vulnerable even as big corporations are showing an improvement in their risk management.

Indonesia's central bank on Thursday surprisingly cut its benchmark interest rate for a sixth time this year, in an effort to spur growth in Southeast Asia's biggest economy.

State-controlled Mandiri is also setting its sights on regional growth, with plans to invest at least RM300 million to open 10 to 12 branches in neighbouring Malaysia over the next three years, Wirjoatmodjo said.

In August, Indonesia and Malaysia agreed to give their banks greater access to each other's markets as part of wider integration efforts among Southeast Asian nations.

Mandiri is also exploring acquisition opportunities in the Philippines and Myanmar, Wirjoatmodjo said, but declined to give more details. ― Reuters