Makassar \u2014 Bank Indonesia\u2019s (BI) decision to raise the benchmark\ninterest rate (BI Rate) from 4.75% to 5.25% in May 2026 is expected to\ntrigger rapid increases in bank interest rates. To anticipate this, BI\nhas strengthened the Macroprudential Liquidity Incentive Policy (KLM) to\nkeep bank interest rates more controlled.<\/p>\n
Director of BI\u2019s Macroprudential Policy Department Dhaha P. Kuantan\nsaid BI has reinforced the KLM interest rate channel based on the spread\nbetween BI Rate and bank credit interest rates. Through this KLM\nincentive, banks are expected to reconsider credit interest rate\nadjustments. He stated that if banks can maintain a certain spread\nagainst BI Rate so that credit interest rate increases are not\naggressive, they stand to gain optimal KLM incentives.<\/p>\n
\u201cThe hope is that after BI raised the rate by 50 basis points (bps)\nrecently, banks will not immediately increase credit interest rates,\u201d\nDhaha said at BI\u2019s Journalist Training event titled \u201cStrengthening\nForeign Exchange and Intermediation Policies for Rupiah Stability and\nCredit Growth\u201d in Makassar, South Sulawesi.<\/p>\n
Dhaha explained that the previous KLM interest rate channel mechanism\nwas calculated based on the elasticity between BI Rate and new credit\ninterest rates. The new incentive scheme, effective from 1 August 2026,\nis based on the spread between BI Rate and new credit interest rates,\nwith the highest incentive of 1% of third-party funds (DPK) for\nconventional commercial banks, Sharia commercial banks (BUS), and Sharia\nbusiness units (UUS).<\/p>\n
Under the regulations, banks that maintain a new credit interest rate\nspread below 3% against BI Rate will receive the maximum incentive of\n100 bps. A spread between 3% and less than 6% earns 40 bps, 6% to less\nthan 10% gets 10 bps, and spreads above 10% receive no incentive.<\/p>\n
With the strengthened interest rate channel mechanism based on BI\nRate and credit interest rate spreads, BI hopes for better policy\ntransmission and controlled credit rate increases, ensuring credit\ngrowth continues.<\/p>\n
Besides the interest rate channel, BI has also strengthened KLM\nlending channel into a financing channel by adding non-traditional\nfinancing. In the new scheme, banks\u2019 holdings of BI-designated corporate\nbonds or Sharia securities can count towards financing for MSMEs,\ncooperatives, inclusion, and sustainable sectors.<\/p>\n
Dhaha explained the move because MSME financing growth is still\nlimited, leaving significant room for expansion through various\nfinancing instruments.<\/p>\n
BI maintains the highest financing channel incentive at 4.5% of DPK,\nincluding an additional non-traditional financing incentive of up to 1%\nof DPK. BI has also introduced a new channel in KLM incentives, the\nfinancing to funding channel, to strengthen banks\u2019 funding sources\nbeyond DPK.<\/p>\n
Under this scheme, additional incentives are given to banks not yet\nreceiving the maximum 5.5% incentive and meeting BI\u2019s macroprudential\nintermediation ratio (RIM) based on achieving funding sources beyond\nDPK.<\/p>\n
Dhaha added that non-DPK funding requires more effort and innovation\nfrom banks, so BI is offering additional incentives of up to 0.5% for\nbanks that strengthen alternative funding sources.<\/p>\n
\u201cSince non-DPK funding requires effort from banks, when they innovate\nin this direction, we can offer incentives,\u201d he said.<\/p>\n
Previously reported, BI decided to raise the BI Rate by 50 bps from\n4.75% to 5.25% in the May 2026 Governor\u2019s Meeting. This is the first\nrate hike since BI aggressively cut rates throughout 2025.<\/p>\n
In 2025, BI cut the BI Rate five times, totalling 125 bps. According\nto BI data, bank credit in April 2026 grew 9.98% year-on-year (yoy),\nhigher than March 2026\u2019s 9.49% (yoy). During the same period, credit\ninterest rates stood at 8.73%, while one-month deposit rates were\n4.16%.<\/p>\n
BI is optimistic that bank credit growth in 2026 will remain within\nthe target range of 8% to 12%. BI continues to push banks to improve\nefficiency to avoid raising credit interest rates and support credit\nimplementation.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/bank-indonesia-introduces-klm-measures-to-curb-credit-rate-increases-1780361006", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }