Banking Competition Intensifies, Asbanda Wants Regional Development Banks to Be More Competitive
Competition in the banking industry is intensifying, prompting Regional Development Banks (BPD) to strengthen their competitiveness and compete more openly with commercial banks. The Association of Regional Development Banks (Asbanda) has emphasised that BPDs do not need protection, but rather equal opportunities in various government programmes and transactions.
Asbanda Chairman Agus Haryoto Widodo said BPDs must be able to compete based on service quality, digital capability, governance and risk management. He therefore argued that BPDs need a level playing field to become distribution banks and government partners as long as they meet the required standards.
“We are not asking for protection. We are asking for a level playing field. BPDs must be ready to compete through service quality, digital capability and governance,” Agus said at a seminar on government support for strengthening BPD liquidity in Bengkulu, as quoted from his statement on Friday (21/8/2026).
The business scale of BPDs is also growing. As of June 2026, the total assets of the 27 BPDs had reached approximately Rp1,043 trillion, with lending reaching around Rp673 trillion and third-party funds collected amounting to around Rp770 trillion.
Agus assessed that the fundamental condition of BPDs remains healthy. However, the growth of intermediation functions amid pressure on funding sources needs attention. Liquidity pressure has the potential to increase the cost of funds, which could ultimately limit the ability of BPDs to offer financing at competitive prices.
“BPD liquidity is not merely a matter of the bank’s balance sheet. BPD liquidity is part of regional development capacity,” Agus stressed.
According to him, BPDs hold a strategic position in supporting regional economies because their financing targets various sectors, from MSMEs, food, housing, health, education, transport to infrastructure.
These characteristics mean the liquidity structure of BPDs differs from commercial banks in general. BPD liquidity is closely linked to the regional fiscal cycle, transfers to regions, regional budgets, and various transactions within the regional government ecosystem.
Asbanda therefore urges that any changes to fiscal design or government fund distribution mechanisms take into account their impact on the resilience of the regional financial ecosystem.
“Policy efficiency remains important. But we also need to maintain a balance between central efficiency and regional financial resilience, so that economic activity and liquidity can continue to provide optimal multipliers for the regions,” Agus said.
Amid increasingly fierce competition, Asbanda also encourages the placement of government funds in BPDs not merely to increase liquidity, but to be directed towards strengthening lending to productive sectors.
These funds are expected to be linked to financing priority sectors such as MSMEs, food, housing, health, education and regional infrastructure.
“Government funds should not stop at being liquidity. We need to push them to become a multiplier for regional economic growth,” Agus said.
Asbanda also asked that national policies consider regional development impact. This is because BPDs not only perform an intermediation function, but are also part of the regional financial ecosystem, expanding financial inclusion and financing regional development.
However, strengthening the position of BPDs does not depend solely on government and regulator support. Asbanda recognises that there is homework to be done by the BPD industry to improve competitiveness amid increasingly open banking competition.
One of these is through increased collaboration among BPDs in liquidity management, money markets, repos, treasury and financing syndication.
On the other hand, BPDs are also required to accelerate digital transformation, strengthen cyber security, governance and risk management, and increase the portion of Current Account Saving Account (CASA) funds originating from the public and businesses.
“We do not want BPDs to be protected from competition. We want BPDs to be strengthened so they are able to compete,” Agus stressed.
With total assets exceeding Rp1,000 trillion and networks rooted across various regions of Indonesia, Asbanda is encouraging BPDs to move up a class to become Regional Development Banks that are healthier, more digital and more competitive.
“A strong national financial system cannot possibly be built only from the centre. It requires strong roots in all regions, and BPDs are one of those roots. When BPDs become stronger, the beneficiaries are not only the BPDs, but the regions and ultimately Indonesia,” Agus concluded.