BI Admits Interest Rate Transmission to Credit Still Stalled

Bank Indonesia has admitted that the transmission of policy rate reductions to the banking sector is not yet optimal, as evidenced in the credit segment. BI Governor Perry Warjiyo stated that the central bank continues to strengthen the effectiveness of monetary easing transmission to drive economic growth. “We are continuously pursuing efforts to enhance the effectiveness of monetary policy easing transmission towards lowering banking interest rates,” he said during the Bank Indonesia Board of Governors’ Meeting press conference on Tuesday (17/3/2026). The interbank money market rate, such as the Indonesia Overnight Index Average (INDONIA), fell 186 basis points to 4.16 percent as of 16 March 2026. Bank Indonesia Rupiah Securities (SRBI) rates for tenors of 6, 9, and 12 months also declined, each by around 190 basis points to the range of 5.25 percent to 5.33 percent. Yields on Government Securities (SBN) followed suit, with the 2-year tenor at 5.99 percent and the 10-year tenor at 6.88 percent. However, reductions in the banking sector remain limited. The 1-month deposit rate dropped 64 basis points to 4.17 percent in February 2026, lower than 4.81 percent in January 2025. Perry assessed that banks still rely on special rates for large depositors, which account for 26.64 percent of total third-party funds (DPK). “Banks’ efforts to reduce special rates for large depositors need to be continued,” he explained. BI is encouraging banks to accelerate reductions in deposit and credit rates, a step deemed crucial to increasing credit demand. “Efforts to lower banking deposit and credit rates still need to be intensified to encourage higher credit growth,” Perry stressed. BI hopes that accelerating transmission will strengthen the banking sector’s intermediation function and support economic growth.