Indonesia's banking sector continued to put in a strong performance moving into the year's third quarter, despite a slight backslide in lending by several banks and a possible rise in bad consumer loans.

In terms of lending, the country's banks added another Rp 21.2 trillion (US$2.3 billion) to their total loan portfolios in August, the central bank said in its latest assessment of the industry released Monday.

Adding to July's figures, total lending has reached Rp 935.8 trillion, or a 21.79 percent increase over the same period last year.

Savings and deposits, meanwhile, also grew in August by another Rp 13.4 trillion to reach a total Rp 1,392.6 trillion during the first eight months of 2007.

Consequently, the banking sector's loan-to-deposit (LDR) ratio rose to 67.3 percent -- the highest since the 1997 Asian financial crisis, Bank Indonesia Senior Deputy Governor Miranda S. Goeltom said.

She added that she expected the industry to achieve its 22 percent loan growth target for this year, after disappointing 14 percent growth in 2006.

Commenting further of the banking sector's performance, BI Deputy Governor Muliaman D. Hadad warned that 20 lenders out of the total number of 130 had actually reported drops in their total lending so far this year.

"The industry as a whole has increased lending, most notably the private banks. But it turns out that there were also some banks whose lending actually shrank," he said.

"This has come to our particular attention, and we will be asking the banks what's actually happening."

However, Muliaman declined to name the banks, or say whether they included any state banks.

A further concern for the industry was a potential rise in bad loans in the consumer sector, he noted. "Banks must pay particular attention to the quality of their consumer loans, such as car and motorcycle loans, which usually rise during the Ramadhan and Idul Fitri holiday season, as well as at the year-end," he said.

"An increase in such consumer loans obliges the banks to perform better credit-risk management."

BI noted that the banking industry's gross non-performing loan (NPL) level declined slightly to 6.31 percent in August from 6.64 percent a month ago. The net NPL level for delinquent loans as regards principle and interest installment payments over the last six months was also down to 2.84 percent from 2.95 percent.

BI's latest assessment comes amid the central bank's efforts to consolidate the industry by requiring smaller banks to increase their capitalizations, or merge with larger banks.

BI also recommends that banks with the same controlling stakeholders be merged. Besides streamlining the number of lenders, these efforts are also aimed at producing stronger and healthier banks.