BI Offers Incentives for LCT Users to Diversify Forex Transactions

Jakarta (ANTARA) - Bank Indonesia (BI) is providing incentives to businesses that utilise the local currency transaction (LCT) scheme through adjustments to hedging instrument premia, in order to encourage the diversification of foreign exchange transactions and deepen the domestic forex market.

The incentives take the form of a 10 per cent addition to the buy swap hedging premia (sell swap hedging to BI), as well as a 10 per cent reduction in the sell hedging premia for domestic non-deliverable forwards (DNDF).

“This not only increases local currency transactions, but also delivers benefits for deepening the domestic foreign exchange market,” said BI Governor Perry Warjiyo at an online press conference on the results of BI’s Board of Governors Meeting in Jakarta on Wednesday.

BI has already implemented LCT cooperation with six partner countries, namely Malaysia, Thailand, China, Japan, South Korea, and the United Arab Emirates.

In line with the expanding use of LCT, BI is also broadening its foreign exchange monetary operations instruments with spot and swap instruments in offshore Chinese renminbi (CNH) against the rupiah.

Furthermore, BI Deputy Governor Thomas Djiwandono added that BI is currently preparing the implementation of LCT using the renminbi (RMB).

In this regard, BI and the People’s Bank of China (PBOC) have agreed to establish an RMB Clearing Bank in Indonesia.