BI Raises Hedging Incentives Again for DNDF Instruments
Jakarta (ANTARA) — Bank Indonesia (BI) has again increased incentives for hedging through its Domestic Non-Deliverable Forward (DNDF) instrument to attract foreign capital inflows and maintain rupiah exchange-rate stability.
More specifically, the incentive for DNDF hedging with BI applies to underlying foreign funding transactions, including portfolio inflows, banks’ offshore borrowing and foreign direct investment (FDI). The premium reduction has been raised to 40 per cent for six-month tenors, from 25 per cent, and to 45 per cent for 12-month tenors, from 30 per cent.
“Our focus is on how we can bring those inflows back. So the policy is more targeted,” BI Governor Destry Damayanti said at a press conference in Jakarta on Wednesday.
BI will also continue incentives for conventional buy-side hedging swaps with the central bank for underlying foreign funding transactions, including portfolio inflows, banks’ offshore borrowing and FDI. These comprise premium reductions of 15 per cent for three-month tenors, 20 per cent for six-month tenors and 25 per cent for 12-month tenors.
Incentives for Local Currency Transactions (LCT) with partner countries will also continue.
LCT incentives support the diversification of foreign-exchange transactions by adding 10 per cent to the premium for conventional sell-side hedging swaps with BI in connection with international trade and investment, and reducing by 10 per cent the premium for DNDF hedging with BI for international trade and investment.
BI has implemented LCT cooperation with seven partner countries: Japan, South Korea, Malaysia, Singapore, Thailand, China and the United Arab Emirates.
Destry said the central bank’s current policy was more targeted at attracting foreign capital inflows, and BI would continue to optimise the incentives available to investors.
The hedging incentives, introduced in June 2026 and refined several times since, are now producing results, she said, with foreign capital inflows totalling US$9.9 billion as of 20 October 2026.
“What we are doing is optimising the incentives we provide to investors who come in, bringing in inflows or placing funds to buy Indonesian portfolios, including government bonds, SRBI [Bank Indonesia Rupiah Securities], as well as loans and other instruments,” she said.
She hopes the larger incentives will lead to repricing of domestic assets, making their yield spread against foreign assets such as US Treasuries more attractive.
“That is what we are doing. For now, our focus is targeted at bringing in those inflows,” Destry said.
At its 20–21 October 2026 Board of Governors Meeting, BI decided to keep the BI-Rate at 5.75 per cent and the lending facility rate at 6.50 per cent. It raised the deposit facility rate to 5.00 per cent.