The Financial Services Authority (OJK) views that the 100 basis point\n(bps) increase in the benchmark interest rate (BI-Rate) to 5.75% has the\npotential to hold back the decline in lending rates that had previously\noccurred throughout 2025 until mid-2026. Chief Executive of Banking\nSupervision at OJK Dian Ediana Rae said that in the short term, banks\nare likely to be more selective in lowering lending rates, given the\nincrease in the cost of funds. \u201cBanks will do so in a measured and\nselective manner, while maintaining a balance between profitability and\ncredit growth. This is important so that the intermediation function\ncontinues to run optimally amid still high financing needs, as well as\nto maintain good credit quality,\u201d Dian said when contacted by ANTARA in\nJakarta, Friday.<\/p>\n
Nevertheless, Dian added, the transmission to lending rates generally\ntakes place more slowly than to deposit rates, due to considerations of\ncompetition, credit quality, and efforts to maintain intermediation\ngrowth. \u201cTherefore, lending rates are expected to remain stable with a\nlimited tendency to increase,\u201d he said. Dian explained that the 100 bps\nincrease in the BI-Rate will generally be responded to by banks through\nadjustments to both lending and deposit rates. Historically, this is a\nnormal market mechanism and banks will adjust pricing in line with their\ncost of fund structure and liquidity conditions. \u201cThus, the magnitude\nand speed of the adjustment of (lending and deposit) rates are not\nalways immediate or uniform across all banks,\u201d Dian said.<\/p>\n
He added that banks continue to consider various factors, including\ninternal liquidity conditions, the structure of third-party funds (DPK),\nthe level of competition, customer loyalty, and the ability and risk\nprofile of debtors. Banks also tend to continue optimising low-cost\nfunds (CASA) to maintain cost of fund efficiency. \u201cTaking these factors\ninto account, the downward trend in the cost of funds that occurred\nafter the 125 bps BI-Rate cut last year, we view that this trend has the\npotential to moderate or even gradually reverse in 2026,\u201d Dian said.\nNevertheless, he added, the adjustment is expected not to be sharp,\nconsidering that banks will be cautious in order to maintain\ncompetitiveness and margin stability.<\/p>\n
Dian also confirmed that the OJK continues to encourage banks to\nmaintain efficiency and strengthen liquidity management. In addition,\nthe OJK encourages banks to ensure that the interest rate transmission\ncontinues to support sustainable economic growth while maintaining\nfinancial system stability. For information, throughout 2025, Bank\nIndonesia (BI) cut the BI-Rate five times with a total reduction of 125\nbps. With that reduction, bank lending rates only fell by 39 bps from\n9.20% at the beginning of 2025 to 8.81% in December 2025. As of May\n2026, the lending rate was recorded at 8.72% and the 1-month deposit\nrate at 4.26%. At the monthly Board of Governors Meeting (RDG) on 19-20\nMay 2026, the BI-Rate was raised by 50 bps, marking the first adjustment\nafter being held at 4.75% since September 2025. However, the rupiah\nexchange rate continued to weaken, touching the Rp18,000 per US dollar\nlevel, prompting BI to raise the rate again by 25 bps through a weekly\nRDG on 9 June 2026, outside the regular schedule. Most recently, on\nThursday (18\/6), through the monthly RDG, the central bank decided to\nraise the BI-Rate by another 25 bps. Cumulatively, the BI-Rate has thus\nincreased by 100 bps in one month to its current level of 5.75%.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/ojk-confident-lending-rates-will-fall-heres-why-1781873437", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }