Bank Indonesia benchmark interest rate falls to 9.71%

Bank Indonesia benchmark interest rate falls to 9.71%

The Jakarta Post, Jakarta

The interest rate on one-month Bank Indonesia SBI promissory
notes fell to an historic low of 9.71 percent during Wednesday's
weekly auction, from 10.07 percent the previous week.

The decline came after Bank Indonesia Governor Burhanuddin
Abdullah said earlier this week that there was still room for the
central bank benchmark rate to fall to below 10 percent.

The central bank has been guiding the SBI rate lower during
the past year amid weak inflationary pressure and a stronger
exchange rate of the rupiah against the U.S. dollar.

The SBI rate was hovering at more than 13 percent earlier this
year.

Some analysts said that the SBI rate could further fall to
around 8 percent amid the global rate fall trend.

The lower rate should not only help ease the government's
burden in servicing huge domestic debts, but should also push
banks to cut their lending rates and make loans cheaper for the
corporate sector, which ideally should help push economic growth.

However, analysts have said that banks remain reluctant to
lend to the corporate sector due to the continued high risks as
many companies were still saddled with a huge amount of bad debt.
On the other hand, many companies are still focusing on
consolidation, and thus have not made expansion plans wherein new
loans would be a priority.

The central bank is considering steps to ease rulings on bank
lending to help revive the intermediary role of the banking
sector.