Banks adjust interest rates on BI rate hike<\/p>\n
Urip Hudiono, The Jakarta Post, Jakarta<\/p>\n
While Bank Indonesia's recent hike of its reference interest rate
\nhas helped ease the rupiah's woes and dampened inflation
\nconcerns, observers worry the rise could stifle consumption in
\nthe economy, with commercial banks adjusting their lending rates
\naccordingly.<\/p>\n
Several major lenders told The Jakarta Post on Wednesday that
\nthey had raised their interest rates by at least 1 percent
\nrecently, in anticipation of the further upward trend of the
\ncentral bank's benchmark BI Rate.<\/p>\n
Bank Mandiri director for treasury and international affairs
\nJ.B. Kendarto said the country's largest lender by assets had
\nalready raised its interest rates by an average of 2 percent
\nsince Sept. 1.<\/p>\n
The central bank raised on Aug. 30 its BI Rate by 75 basis
\npoints (bps) to 9.5 percent.<\/p>\n
BI further hiked the rate 50 bps to 10 percent on Tuesday to
\nstrengthen the rupiah and anticipate a possible rise in inflation
\ndue to the government's plan to hike fuel prices again in
\nOctober.<\/p>\n
This encouraged banks to raise their interest rates to
\nmaintain their profits and competitiveness, thus making both
\ncommercial and consumer loans more expensive, which poses a
\nthreat to the economy in the long run.<\/p>\n
With the latest rate adjustment, Kendarto said Mandiri's
\ninterest rates for loans were now between 12 percent and 16
\npercent, while its interest rates for savings and deposits
\ncurrently stood between 8.5 percent and 10 percent.<\/p>\n
"We can still tolerate another BI Rate hike to up to 12
\npercent," he said.<\/p>\n
Bank Central Asia (BCA) vice president Jahja Setiaatmadja said
\nthe country's third-largest lender had raised its loan interest
\nrates by 1 percent to a maximum of 16 percent.<\/p>\n
Its savings and deposit interest rates, meanwhile, have also
\nbeen raised by an average of 1.5 percent, to between 6.75 percent
\nand 8.75 percent.<\/p>\n
Jahja said BCA would likely raise rates again if the BI Rate
\nreached 10.5 percent.<\/p>\n
Another top-10 lender, Bank Internasional Indonesia (BII), has
\nsaid that its credit interest rates have been raised by between 1
\nand 2 percent.<\/p>\n
However, BI's director for research and banking license,
\nMuliaman D. Hadad, expected banks not to pass on the financial
\nburden resulting from the BI Rate hike to customers, as BI had
\ntaken into consideration the effect on the banking industry and
\nthe real sector.<\/p>\n
Muliaman explained that BI's rate hike would increase the cost
\nof funding for banks by less than 1 percent.<\/p>",
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