JAKARTA, July 13 (Reuters) - Taiwan's Cathay Financial Holdings is conducting due diligence to raise its stake to 51% in mid-sized Indonesia lender Bank Mayapada Internasional, an Indonesia regulatory official said on Monday.

Cathay, through its arm Cathay Life Insurance, at the end of 2019 held the biggest stake in the bank at 37.33%, while PT Mayapada Karunia, a unit of Indonesian conglomerate Mayapada Group, was the second biggest stakeholder with 26.42%.

Slamet Edy Purnomo, a deputy commissioner for banking surveillance at the Financial Services Authority (OJK), said Cathay is expected to complete due diligence next week.

"OJK is supportive because Cathay Financial Holdings is the largest financial institution in Taiwan," Purnomo said in a text message, adding the move could aid the bank's development and Indonesia's economy.

Cathay Financial declined to comment on the issue.

"Cathay has been my partner ... At times like this, partners have to strengthen the capital but we don't know how much capital will be injected yet," Dato Sri Tahir, the founder of Mayapada Group, told Reuters by telephone.

Bank Mayapada reported a 79.2 billion rupiah ($5.52 million) net profit in the first quarter, 44.5% down on the same period a year earlier.

Its non-performing loan ratio was at 6.94% at the end of March, compared with a 2.77% industry average and OJK's threshold of 5%.

Media reported Tahir has injected capital into the lender several times this year to help maintain its capital adequacy ratio, which was at 13.75% at the end March, lower than 14.59% at the same time a year earlier.

Earlier this year, OJK said it has also approved South Korean lender KB Kookmin Bank increasing its ownership in another mid-sized Indonesian lender Bank Bukopin, which has been facing liquidity problems. ($1 = 14,350.0000 rupiah) (Reporting by Tabita Diela, additional reporting by Emily Chang in Taipei; Editing by Ed Davies)