BI sets deadline for banks to cut rates

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)