Several banks in the country have begun to cut their deposit rates, following a decision by the Deposit Insurance Agency last week to further lower the rate for guaranteed deposits to 9 percent.
Banks are still weighing options for trimming their lending rates as well, which is seen as necessary to spur demand for growth-stimulating credits. The central bank recently announced it was keeping its key rate at 9 percent for the time being.
Bank Central Asia (BCA), the country's second largest lender by assets, lowered its interest rate for all rupiah-denominated time deposits under Rp 1 billion (US$110,000) to 6.5 percent, while offering newly adjusted rates of between 6.5 and 7 percent for all other rupiah deposits above that amount. The bank's rate for all dollar deposits is 3.5 percent.
PermataBank, the eighth largest lender, has trimmed its rates for one- and three-month rupiah deposits by a half percentage point to 6.5 percent, and by a quarter percentage point to 6.5 percent for six-month and one-year deposits. Its dollar deposit rate was kept at 2.5 percent.
BCA spokesperson Dwi Narini was quoted by Antara as saying the bank had been careful in lowering its deposit rates, to avoid any withdrawal of funds from depositors.
The bank will also consider trimming its lending rates to between 11 and 12 percent from the industry's current 14 percent average.
BCA saw its third-party funds -- which include time deposits -- grow by almost 18 percent to Rp 152.7 trillion last year, while its lending grew 13 percent to Rp 61.4 trillion.
The Deposit Insurance Agency, or LPS, last week lowered the maximum interest rate it will still guarantee for rupiah-denominated deposits for the one-month period from April 15 to May 14, to 9 percent. It left the maximum guaranteed rate for dollar deposits at 4.75 percent.
The agency lowered the guaranteed rupiah deposit rate despite the fact the central bank on March 5 kept its key rate at 9 percent, on concerns of a possible uptick in inflation
The BI rate is used as a reference for bank rates, as well as for the sale of central bank bills. The LPS also uses the BI rate as the basis for determining the rates for guaranteed deposits.
Lenders in the country have lately been criticized for preferring to invest their money in central bank bills and government bonds, rather than lending to the real sector, which is still deemed as risky. In addition, loan demand has slumped recently as the investment climate still struggles to fully recover.
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