Banks told to lower loan rates

Vice President Jusuf Kalla called on local banks on Wednesday to lower their interest rates in order to help revitalize the private sector as well as improve the competitiveness of their businesses in the global market.

"Banks should lower their interest rates to help nurture the real sector, although I understand that the central bank has adopted a tight fiscal policy by gradually increasing its benchmark interest rate to help ease inflationary pressures," he said.

Kalla said banks should lower their interest rates to about 6 percent like those given by banks in Malaysia.

This figure is lower than Bank Indonesia's benchmark interest rate, which currently stands at 8.02 percent.

Kalla's remark was made during a ceremony to mark a working meeting of state-owned Bank Rakyat Indonesia (BRI) held to revise its business strategy after the government reorganized the bank's board of management.

At present, the private sector still has to pay very high interest rates for loans with most banks having interest rates of over 7 percent.

Kalla also suggested that banks boost their efficiency in order to offset a decline in their revenues as a result of providing lower interest rates by reducing their overhead costs as well as the luxurious facilities enjoyed by their officials. -- JP