The Financial Services Authority (OJK), starting next month, will set a maximum limit for term deposit interest rates as part of efforts to help lenders lower the cost of funds and, possibly, to lower the loan rate.

OJK Banking Supervision Commissioner Nelson Tampubolon said the OJK would set the new maximum limit at 100 basis points (bps) above the Bank of Indonesia (BI) benchmark rate for lenders with capital base between 5,000 billion rupees ($ 373.8 million) and 30,000 billion rupees. , known as BUKU III lenders.

The limit for BUKU IV or banks with capital base greater than Rs 30 trillion will be set at 75 basis points.

With the BI rate at 7% currently, this means that the term deposit rate for BUKU III lenders will be capped at 8% and the term deposit rate for BUKU IV lenders will be capped at 7.75%.

The new percentages are lower than the cap on the existing term deposit rate, which was first imposed by the OJK in October 2014, when the BI rate stood at 7.5%.

In the 2014 measure, the OJK set its cap at 200bp above the BI rate, i.e. 9.5% for BUKU IV lenders, while the cap for BUKU III lenders was set at 225bp at above the BI rate of 9.75 per cent.

No limit has been set for BUKU I and II lenders as they are supposed to follow the rate movements of the big banks.

Nelson said the OJK will keep a close watch on banks that still offer term deposit rates above the BI rate and the Deposit Insurance Corporation (LPS) rate.

The management of these banks will be required by each of their OJK banking supervisors to limit the maximum term deposit rates in accordance with the new percentages set by the agency.

‘???? We will impose the new measure as soon as possible, no later than next month,’ ???? he said on Monday.

Nelson said the OJK would not cap lending rates, but that its banking supervisors would require each of the banks they oversee to maintain or reduce net interest margins in order to help lower lending rates.

OJK President Muliaman D. Hadad previously said the agency would also offer incentives to banks able to reduce their net interest margins. Incentives will include providing easier avenues for opening branches or launching new products.

In an effort to stimulate the economy, the OJK has partnered with BI and the government to promote lower single-digit bank lending rates by the end of this year, from more than 10% currently.

Nelson said the OJK expects the government to release soon the regulations for its recently announced 5% rate cap plan for term deposits held by government and state-owned enterprises.

This plan followed the observation of the OJK ‘???? that government and state-run companies owned a large amount of term deposits and often acted as big clients, demanding term deposit rates of 8 to 10 percent, keeping the costs of funds in check. state high banks.

Separately, Indonesian Employers’ Association (Apindo) chairman Hariyadi Sukamdani said business owners expected the new measures prepared by the government, BI and OJK to cut costs. funds, which has often pushed term deposit rates over the country. inflation rate.

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