BI sets deadline for banks to cut rates

JAKARTA (JP): Bank Indonesia (BI) has set a deadline of April 15 for commercial banks to comply with its newly established ceiling for deposit rates.

BI director for commercial bank supervision and development, Mukhlis Rasyid, said in a circular letter Wednesday that a Feb. 27 regulation establishing a ceiling on deposit rates would come into force April 16.

The regulation sets a ceiling for bank time deposit rates at 1.25 times BI's short-term promissory note (SBI) rates.

Mukhlis said the central bank, however, had set a temporary ceiling for the deposit rates at 1.5 times its SBI rates for the interim period leading up to April 16.

Banks which have provided deposit rates higher than the set ceiling before the issuance of the circular letter will be allowed to maintain the rate until the deposit matures, Mukhlis said.

"For banks which continue to offer deposits with rates higher than the ceilings ... the government will not guarantee those deposits," he said.

BI also has required banks to notify their customers that the government may lift its bank deposit guarantee for banks violating the rate ceilings.

The government guaranteed all deposits and other obligations of domestic banks, including joint-venture banks, last January in a bid to restore public confidence in the banking system.

Public confidence in domestic banks diminished following a government closure of 16 private banks last November. The move prompted people to divert their savings from domestic private banks to foreign or state banks.

The government's blanket guarantee on all bank obligations has made the risks of saving money in each bank more or less the same, making interest rates the major factor in choosing banks.

In order to ease a growing interest rate war, BI decided to cap deposit rates by tying them to the SBI rates.

SBI rates currently range from 40 percent for a one-day SBI to 16 percent for a one-year SBI. The rates for two days, three to six days, one week, two weeks, one month, two months, three months and six months stand at 35 percent, 28 percent, 25 percent, 24 percent, 22 percent, 20 percent, 19 percent and 18 percent respectively.

As of yesterday, a number of banks had reduced their rupiah deposit rates. But most rates remained high.

State banks like Bank Dagang Negara, Bank Rakyat Indonesia and Bank Bumi Daya, for instance, had cut their rates by 100 basis points to 26 percent for one month and three months and 20 percent for six months and one year.

Bank Subentra offered rates of 27 percent, 24 percent, 22 percent and 20 percent for one month, three months, six months and one year deposits respectively.

For the same maturity periods, Bank BDNI's rates were 25 percent, 22 percent, 20 percent and 20 percent respectively. Bank PSP's rates were 22 percent, 19 percent, 18 percent and 16 percent, while Bank Bali's rates were 32 percent, 28.5 percent, 27 percent and 24 percent. (rid)