BI Rate Rises to 5.25 Percent, BI Urges Banks to Improve Efficiency

Bank Indonesia (BI) Governor Perry Warjiyo urged the national banking sector to improve operational efficiency so that lending rates remain stable while credit continues to grow after the BI Rate was raised by 50 basis points to 5.25%. ‘We ask banks to also improve efficiency so as not to raise lending rates. Efficiency must be increased to truly push credit,’ he said at a press conference after the Board of Governors’ meeting in Jakarta on Wednesday, 20 May 2026. He stressed that liquidity in the money and banking markets is currently abundant, aided by BI’s purchases of Government Securities in the secondary market totalling Rp73.28 trillion of a year-to-date Rp140.57 trillion as of 19 May 2026. BI data show April 2026 M0 growth at 14.1% year-on-year, up from the previous month. The loan-to-deposit ratio (AL/DPK) stood at 25.39%, with deposit growth remaining robust at 11.39% year-on-year. By April 2026, bank credit grew 9.98% year-on-year, higher than March’s 9.49%. BI projects credit growth for 2026 to stay in the 8-12% range, and the average lending rate in April 2026 was 8.73%. To support intermediation, BI will strengthen macroprudential policy through the Macroprudential Intermediation Ratio (RIM), expanding its coverage from 1 July 2026. The Macroprudential Liquidity Incentive Policy (KLM) will be enhanced with additional incentives up to 0.5% from 1 August 2026. Senior Deputy Governor Destry Damayanti said the policy aims to spur banks to seek funding beyond DPK and highlighted agriculture and trade as sectors with ample room for lending due to their multiplier effects on the economy and job creation. Perry noted that the rate increase was driven mainly by a 28.4% year-on-year growth in ordinary bank giro accounts with Bank Indonesia. He argued that the rupiah should have room to strengthen given a low current account deficit, and he expects the rupiah to strengthen in July–August 2026 following the 5.25% rate hike to help external stability. Governor Warjiyo reaffirmed BI’s all-out stance to stabilise the rupiah through interventions in the global foreign exchange market and the SRBI instrument.