Ni Made Tasyarani, Jakarta – Bank Indonesia (BI) plans to roll out additional macroprudential liquidity incentives (KLM) on Dec. 1 through new disbursement schemes to boost sluggish credit growth and expedite the pass-through of central bank rate cuts to commercial banking rates.
BI macroprudential policy director Irman Robinson said the central bank would strengthen liquidity incentives for banks based on their commitments and performance in terms of lending to certain sectors and interest rate transmission, or passing on BI rate cuts.
"We are seeking to push for stronger credit growth. Banks certainly have their credit growth commitments and business plans for each quarter. We will disburse the incentives based on their commitments," he explained at a media training session in Bukittinggi, West Sumatra, on Friday.
The forward-looking assessment scheme is to provide banks with upfront incentives, aiming to ensure sufficient liquidity to achieve the central bank's target for average loan growth in the banking industry this year.
Lending growth has been sluggish so far in 2025, remaining below BI's target range of 8 to 11 percent, though it has seen an uptick in September to 7.7 percent year-on-year (yoy), up from 7.56 percent recorded in the preceding month.
BI's KLM refers to reduced statutory reserve requirements (GWM), or the funds banks need to keep at the central bank, for lenders that perform well in their lending to four priority sectors, with a reduction in the GWM from the normal rate of 9 percent of a bank's third-party funds (DPK).
The reduction is set at 1.5 percentage points for lenders performing well in the agriculture, industry and downstream sectors, 0.6 percentage points for services, including the creative economy, 1.4 percentage points for those doing well in housing, as well as 1.5 percentage points for micro, small and medium enterprises (MSMEs), cooperatives and the inclusive and sustainable sectors.
If a bank performs well in each of these sectors, they could achieve a KLM reduction of 5 percentage points, which would bring their GWM down to 4 percent.
Additionally, the central bank plans to add incentives through what it calls the "interest rate channel" to improve monetary policy transmission.
BI has cut the benchmark interest rate by a total of 150 basis points (bps) from 6.25 percent to 4.75 percent so far this year. On Wednesday, the central bank kept the interest rate unchanged, though it noted that it was open to more cuts.
"We will give higher incentives to banks that can quickly align their credit interest rate with Bank Indonesia's policy," Irman said, detailing that good performance in this regard could earn a bank another 0.5 percentage point reduction on their statutory reserve requirement, which could in an ideal case bring the GWM down to 3.5 percent.
A bank with total DPK of Rp 100 trillion (US$6 billion), for example, would receive an extra Rp 5.5 trillion in liquidity through funds freed up from BI.
BI Governor Perry Warjiyo said in a press conference on Wednesday that the central bank's current focus was on strengthening the effectiveness of transmission.
He once said that it would take about six months until a benchmark rate reduction translated into a lower rate charged by banks from borrowers. The average loan rate had only come down by 15 basis points to 9.05 percent as of September from 9.2 percent at the turn of the year.
The slow transmission reflected soft growth in loan issuance, despite last month's Rp 200 trillion liquidity injection from the government to state-owned commercial banks.
Source: https://asianews.network/bank-indonesia-to-add-incentives-amid-slow-lending