BI Rate Rises: Why Might Loan Repayments Also Jump?

JAKARTA, KOMPAS.com — Bank Indonesia’s decision to raise the policy rate, or BI Rate, to 5.25 percent in May 2026 could affect loan instalments for households, including mortgages (KPR), motor vehicle loans (KKB), and unsecured personal loans (KTA). At the Board of Governors’ Meeting (RDG) on 19–20 May 2026, BI raised the BI Rate by 50 basis points. The move was the first hike in two years and exceeded market expectations. It was adopted amid pressure on the rupiah and rising global uncertainty.

BI Governor Perry Warjiyo said the rate increase aims to reinforce rupiah stability while keeping inflation within the government’s targets. ‘This increase is a continuation of steps to strengthen rupiah stability amid the heightened global volatility stemming from the conflict in the Middle East, and a pre-emptive move to keep inflation in 2026 and 2027 within the government’s targets,’ he said at a press conference following the RDG on Wednesday, 20 May 2026.

BI Rate remains the main benchmark in Indonesia’s interest-rate framework. When the BI Rate is raised, banks’ cost of funds tends to rise. That, in turn, pushes banks to adjust deposit rates and loan rates. The impact is most evident on floating-rate loans, such as floating-rate mortgages, vehicle loans, and working-capital credit.

In a note, BI said average lending rates across banks in April 2026 stood at 8.73 percent, while one-month deposits reached 4.16 percent. Nevertheless, Perry urged the banking industry to maintain efficiency so the hike in the BI Rate is not passed directly to households’ loan costs. ‘We also ask banks to improve efficiency so as not to raise loan rates. Efficiency must be increased to truly spur credit,’ Perry said.