Banks raise deposit rates to 59 percent
Banks raise deposit rates to 59 percent
JAKARTA (JP): Domestic commercial banks have raised their
deposit interest rates by over 2 percentage points as a result of
tighter liquidity and competition with the country's central bank
to attract funds.
Most commercial banks have raised their one-month deposit
rates to 59 percent per annum, up from 57 percent last week. The
banks include troubled Bank Danamon, Bank Central Asia, state
Bank Ekspor Impor Indonesia and Bank Pembangunan Indonesia.
Some banks are still offering slightly lower rates. Bank
Internasional Indonesia is offering a one-month deposit rate of
57 percent, Bank Niaga is offering 54 percent and Bank NISP has
set its rate at 52 percent.
"Even when the on-counter rate is set at 59 percent for a one-
month deposit, you can still ask for an even higher rate. If you
have Rp 500 million, I bet you could even get 65 percent," a
money-market dealer at a local private bank said.
The rate hike follows an increase in the maximum time deposit
rates which will be guaranteed by the government and an increase
in the benchmark central bank one-month deposit rates.
The government raised the ceiling rates for 24-month deposits
to 27 percent and for one-month deposits to 59 percent this week,
up from 26 percent and 57 respectively in the previous week.
Meanwhile, the average rate of the weekly auction of Bank
Indonesia one-month promissory notes (SBIs) on Tuesday stood at
70.14 percent per annum, up from 69.39 percent last week.
The central bank has been offering one-month SBIs through an
auction system since last month to allow the market to determine
the interest rate. The measure is included in the package of
reforms agreed to with the International Monetary Fund (IMF).
The bank plans to auction SBIs for all maturities.
Niaga's chief economist, Wahyu Eko Wardono, said that a number
of depositors had taken advantage of SBIs since they were made
available to the public because they offered a high return and
were risk-free.
"This automatically gives bank customers stronger bargaining
power, so commercial banks must increase their rates to hold on
to their customers," Wahyu told The Jakarta Post.
Former Bank Indonesia director I Nyoman Moena agreed and said:
"As long as SBI rates are higher than bank deposit rates, people
will prefer to buy SBIs rather than hold their money in bank
deposits."
Moena said he feared that Bank Indonesia would absorb too much
money through the SBI auction, unless interest rates were
lowered.
That scenario would hamper efforts to revitalize the banking
sector and would further hurt the real sector because high
lending rates would make it hard for companies to get loans, he
pointed out.
Wahyu said commercial banks could also benefit from the high
rates if they had excess funds with which to buy central bank
promissory notes.
"For example, if you offer 57 percent deposit rates, and place
funds in SBIs at 65 percent then you will enjoy an 8 percent
spread," he said.
But banks suffering from a lack of liquidity would likely have
a bigger negative spread, he added.
Only banks with better fee-based income -- as opposed to
interest-based income -- could survive in such a condition. (das)