Bank Indonesia Acknowledges High Interest Rates Hampering Credit Growth
Jakarta – Bank Indonesia’s Senior Deputy Governor Destry Damayanti has acknowledged that credit interest rates, which remain relatively high, constitute one of the principal impediments to credit growth and national economic expansion.
From a liquidity perspective, the banking sector is in a comfortable position. The liquid assets ratio stands at 27.6 per cent. The capital adequacy ratio has reached 25.9 per cent, substantially above the minimum threshold of 8 per cent.
Nevertheless, credit growth remains suboptimal. Throughout 2025, credit expanded by 9.69 per cent, a decline from 10.39 per cent in 2024, although this remains within Bank Indonesia’s target range of 8 to 11 per cent.
“The question is, when we look at liquid assets, they are quite high. But we still observe a gap—our GDP gap continues to persist, and the same occurs in banking credit. This means that although banks have abundant liquidity, credit growth has not yet reached optimal levels,” Destry remarked at the launch of Financial Stability Study No. 46 in Jakarta on Friday (27 February 2026).
Throughout 2025, Bank Indonesia reduced its policy rate by 150 basis points. However, banking lending rates have only declined by 40 basis points, falling from 9.20 per cent at the beginning of 2025 to 8.80 per cent in January 2026.
“We observe that lending rates for new credit have indeed declined considerably—88 basis points. This suggests that banks are increasingly prepared and their lending appetite has begun to strengthen,” said Destry.
He assessed that persistently high credit interest rates are suppressing financing demand from the business sector. Amid weak demand, the banking sector’s intermediation function has not operated at full capacity.
“Therefore, one of the factors constraining credit growth is the interest rate, which remains relatively high,” he stated.
As of February 2026, total stimulus measures reached Rp 427.5 trillion. Rp 357.9 trillion originated from lending channel schemes, with the remaining Rp 69.6 trillion provided through interest rate channels introduced over the past two months.
Bank Indonesia is also coordinating with the Financial Services Authority to encourage adjustments to deposit rates, including special savings rates, to create greater room for credit rate reductions.
Destry noted substantial potential for credit disbursement. Undisbursed loans amount to Rp 2.506 trillion, equivalent to 22.65 per cent of available credit ceilings.
“This represents a considerable figure. These are resources that we must encourage to mobilise in order to drive economic growth,” he concluded.