While the economy is likely to slow this year, Bank Indonesia forecasts the banking sector to stay healthy, signaled by a strong first-quarter performance.

"From observing the banking sector's performance in the first quarter of the year, we are optimistic it will grow as expected," BI director of banking research and regulation Halim Alamsyah told The Jakarta Post on Friday.

Halim said regardless of current weakening global economic conditions, banks had not changed their annual business plan -- to increase the number of corporate loans, which are larger in amount than consumer loans.

Since February, banks have disbursed Rp 1,045.9 trillion (US$113.68 billion) in loans and have received Rp 1,474.5 trillion in third-party funds. The amount kept increasing after January, capping the loan-to-deposit ratio (LDR) at 70.9 percent in February.

Halim said the banking sector's total lending in March was greater than in February. However, he could not mention the amount because it was still being calculated.

"The lending was mostly for consumer loans, but the amount of corporate loans has been increasing since last year as well," he said.

"The amount of third-party funds in the first quarter this year, however, was slightly lower compared to December 2007 due to lagging economic activities and tax payments, which affected the amount of deposits and giros," said Halim.

BI also said the sector's gross non-performing loan (NPL) rate was relatively healthy at 4.78 percent, below its maximum tolerable rate of 5 percent.

Bank Nigara Indonesia (BNI) analyst Ryan Kiryanto said banks would consider current economic conditions before revising their business plans.

"Banks can revise their business plans before June. I think sooner or later banks will bring their targets down, considering the country's high inflation rate, which will reduce consumers' purchasing power," he said.

Ryan said while he was not overly optimistic about the country's economy, he predicted the banking sector's total lending would still grow by about 20 percent.

BI forecasts the sector's total lending to grow by between 22 and 24 percent this year, with third-party funds increasing between 16 and 18 percent, pushing the LDR to 72 percent.

The banking sector's total lending rose 25.5 percent from Rp 832.9 trillion in 2006 to Rp 1,045.7 trillion in 2007, while third-party funds increased by 17.4 percent to Rp 1,510.7 trillion, capping the LDR ratio at 69.2 percent.

Last year, some of the country's largest banks recorded magnificent performances, boosted by increasing loans and low NPL rates.

BNI's total lending increased by 26 percent to Rp 41.75 trillion in 2007, with a net NPL rate of 2.3 percent. Its LDR, meanwhile, was 92 percent, increasing from 85 percent in 2006.

BNI booked a lending growth of 33 percent from Rp 66.46 trillion in 2006 to Rp 88.65 trillion in 2007, with a net NPL rate of 4.01 percent and an LDR of 62 percent.

The rise in LDRs is expected to boost the economy. BI has repeatedly urged banks to channel their funds to the real sector, which can reduce unemployment and increase growth in other productive sectors.