Wednesday, 30 Ramadhan 1442 / 12 May 2021

Wednesday, 30 Ramadhan 1442 / 12 May 2021

Boosting the Economy, State-Owned Banks Lower Interest Rates

Rabu 03 Mar 2021 14:26 WIB

Rep: Novita Intan/ Red: Elba Damhuri

Indonesian government focuses on driving economic activities by pushing banks to lowering interest rates.

Indonesian government focuses on driving economic activities by pushing banks to lowering interest rates.

Foto: Dhemas Reviyanto/ANTARA
State-owned banks (bank BUMN) have been lowering interest rates to push business

REPUBLIKA.CO.ID, JAKARTA -- Indonesian government focuses on driving economic activities in the midst of Covid-19 pandemic. Two-way policies from upstream to downstream are important so that public spending increases, including the issue of bank interest rates.

The government has asked banks to lower loan interest rates. This is because the Bank Indonesia benchmark interest rate has fallen to its lowest level of 3.5 percent.

In response to this, a number of State-Owned Association Banks (Himbara) have adjusted their loan interest rates periodically. PT Bank Rakyat Indonesia has lowered the basic lending rate (SBDK) since February 28, 2021.

President Director of BRI Sunarso said that the lowering prime lending rate covered all segments such as corporate, retail, micro, mortgage (KPR) and non-mortgage loans with a decrease of 150 basis points to 325 basis points. "The largest decrease was given to non-mortgage consumer loans by 3.25 percent. With this decrease, the non-KPR SBDK changed from the original 12 percent to 8.75 percent, "he told reporters, Wednesday (3/2).

Sunarso detailed that the company also lowered the prime lending rate for mortgages by 2.65 percent, from 9.90 percent to 7.25 percent. The prime lending rate reduction was also carried out by the micro segment by 2.5 percent. This change makes the prime lending rate micro drop from 16.50 percent to 14 percent.

In the corporate and retail segment loans, the company decreased the prime lending rate by 1.95 percent and 1.5 percent, respectively. So at this time, the prime lending rate for corporations has changed from 9.95 percent to eight percent. Then, the prime lending rate for the retail segment was reduced from 9.75 percent to 8.25 percent.

Throughout 2020, the company has lowered its interest rates by 75 basis points to 150 basis points, even specifically for the restructuring of interest rate relief, the company reduced it between 300 basis points to 500 basis points.

In addition to the trend of decreasing reference interest rates, Sunarso continued, the reduction in credit interest rates was carried out due to lower cost of funds and increased levels of banking efficiency due to ongoing digital initiatives



Bank Negara Indonesia (BNI) also cut credit interest rates in order to stimulate the acceleration of credit growth this year. In early 2021, the company has adjusted loan interest in line with the benchmark interest rate.

As of February 28, 2021, non-KPR consumption credit was set at 8.75 percent, a decrease compared to the end of December 2020 at 11.7 percent. Then the mortgage loan of 7.25 percent decreased compared to the position at the end of 2020 of 10 percent.

The company also lowered the prime lending rate for retail credit to 8.25 percent or lower than the position at the end of December 2020 of 9.8 percent. Thus, the prime lending rate for corporate loans is eight percent or down from the position in December 2020 of 9.8 percent.

President Director of BNI Royke Tumilaar said that credit is closely related to domestic demand growth which is the main source of economic growth. It is important for banks to ensure public confidence in the economy.

"In determining the credit interest rate for each debtor, we will take into account the estimated risk premium component, the amount of which depends on the bank's assessment of the risk of each debtor or group of debtors," he said.

In the future, Royke emphasized that the company will review interest rates regularly. One of the company's strategies is to reduce the cost of funds so that credit interest rates can also be lower following the downward trend in Bank Indonesia's interest rates.

Coordinating Minister for the Economy Airlangga Hartarto admitted that up to now, bank credit interest is still high. The government seeks to communicate with banks so that the benchmark interest rate and BI credit interest rate can be transmitted to customers.

It is feared that if bank credit rates do not go down, people will not take car and house loans even though they are given a policy of exemption from luxury goods sales tax (PPnBM) and value added tax (VAT).


Finance Minister Sri Mulyani said this was a concern of the Financial System Stability Committee (KSSK), including the Ministry of Finance, Bank Indonesia (BI), the Financial Services Authority (OJK), and the Deposit Insurance Corporation (LPS). At the last KSSK meeting, the OJK had conveyed the reasons why each bank held credit rates at a certain level.

There are at least three reasons that shape credit rates, namely the condition of the initial balance sheet, the health of each bank, and the cost of funds. 

"There must be predictability of a policy rate which should be reflected generally in the form of a lending rate which reflects the interest rate that has fallen quite sharply in the last few times," she explained.

Governor of Bank Indonesia Perry Warjiyo said that during the pandemic the Central Bank had tried hard to use all its policy instruments to promote national economic recovery. In addition to the interest rate policy, Bank Indonesia has also added liquidity or quantitative easing (QE) to banks.

As of February 16, 2021, the QE carried out by Bank Indonesia was IDR 750.38 trillion, equivalent to 4.86 percent of gross domestic product (GDP) since 2020.

"Bank Indonesia has also increased banking liquidity by Rp. 750.38 trillion or 4.86 percent of GDP, including one of the largest emerging markets," he said.

Bank Indonesia has also purchased government securities (SBN -- Surat Berharga Negara) through a burden sharing scheme of Rp. 40.77 trillion, starting from the beginning of the year to February 16, 2021, in accordance with a joint decision between Bank Indonesia and the Minister of Finance on April 16, 2020 which was extended until 31 December 2021.

In the meeting of the Board of Governors of Bank Indonesia in February 2021, the Central Bank also decided to loosen the Loan to Value (LTV) ratio for home ownership loans to 100 percent and easing down zero percent advances for motor vehicle loans to zero percent to encourage public consumption.


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