Based on Article 1 number 15 of Bank Indonesia Regulation Number 14/15/PBI/2012 concerning Asset Quality Assessment for Commercial Banks, Foreclosure (“AYDA”) is defined as assets acquired by the Bank, either through auction or outside of auction based on voluntary surrender by the owner of the collateral or based on the authority to sell outside of auction from the owner of the collateral in case the debtor fails to fulfill their obligations to the Bank.
Furthermore, Article 12A paragraph (1) of Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector states that Commercial Banks can purchase part or all of the collateral, either through auction or outside of auction based on voluntary surrender by the owner of the collateral or based on the authority to sell outside of auction from the owner of the collateral in case the debtor fails to fulfill their obligations to the Bank, provided that the purchased collateral must be liquidated as soon as possible. Therefore, the Bank can execute through auction without the debtor’s consent, while the underhand execution process requires the debtor’s consent.
Steps in Conducting AYDA
1. Debtor Must Be Declared in Default (Non-Performing Loan)
This is stipulated in Article 34 of OJK Regulation No. 40/POJK.03/2019 concerning Asset Quality Assessment for Commercial Banks, which states: “The Bank must designate the quality of productive assets as non-performing before carrying out the takeover of AYDA.”
Furthermore, referring to Article 92 paragraph (3) letter e, the quality of receivables is considered non-performing if the principal and/or interest payment delay exceeds 180 (one hundred and eighty) calendar days.
2. The Bank and Debtor Can Negotiate
At this stage, the Bank can offer several options to the Debtor before conducting AYDA, namely: a. Offer for settlement; b. Offer to sell the collateral themselves; c. Offer for credit takeover to another bank.
3. The Bank Conducts a Revaluation of the Collateral
The Bank will conduct a revaluation through a Public Appraisal Service Office. The assessment has certain criteria as follows:
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- Market value: the value of the collateral according to the current market price at a determined time;
- Collateral condition: examination of the feasibility of the collateral condition. The extent of damage or deficiencies will affect the collateral value;
- Collateral risk: assessment of potential risks after the auction is conducted.
Based on Article 45 letter b of PMK 27/2016, for auction execution according to Article 6 of Law Number 4 of 1996 concerning Mortgage Rights with a limit greater than Rp 1 billion, it must be appraised by an Appraiser. Meanwhile, the auction limit value below Rp 1 billion can be determined by the Bank’s internal appraiser.
4. Auction at Market Price
The valuation basis used for the auction is the market value and liquidation value. The Bank can prioritize the market value and use the liquidation value as the last alternative to set the limit value. It is important to note that auctions conducted with a limit value below the market price are permitted and valid according to the applicable regulations as long as it is within reasonable limits.
5. AYDA Time Frame
Referring to Article 79 PMK No.213/PMK.06/2020 paragraphs (2) and (3) concerning Auction Implementation Guidelines, which state:
(2) In the event that a financial service institution intends to purchase collateral as referred to in paragraph (1), the financial service institution must submit to the Auction Officer a statement letter in the form of a notarial deed containing a statement that the purchase is conducted for another party to be designated later within 1 (one) year from the auction date. (3) In the event that the time period referred to in paragraph (1) has elapsed, the financial service institution is designated as the Buyer.
Furthermore, referring to Article 12A of Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector:
“Commercial Banks can purchase part or all of the collateral, either through auction or outside of auction based on voluntary surrender by the owner of the collateral or based on the authority to sell outside of auction from the owner of the collateral in case the debtor fails to fulfill their obligations to the Bank, provided that the purchased collateral must be liquidated as soon as possible.”
Therefore, the Bank can purchase the Mortgage Rights at auction with the condition that before the auction, they must submit to the Auction Officer a statement letter in the form of a notarial deed containing a statement that the purchase is conducted for another party to be designated later, and if the actual buyer is not designated within 1 (one) year from the auction date, the creditor bank is automatically declared the buyer.
What If the Bank Conducts AYDA Not in Accordance with Legal Provisions?
If the Bank conducts AYDA execution not in accordance with procedures, the Debtor can file a lawsuit for unlawful acts according to Article 1365 of the Civil Code, with the following elements:
- The existence of an unlawful act;
- The existence of fault;
- The existence of loss;
- The existence of a causal relationship between the act and the loss.
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