BI to require sharia banks to up reserve deposits
BI to require sharia banks to up reserve deposits
Tony Hotland
Jakarta
Starting Sept. 1, Bank Indonesia (BI) will require sharia banks
with assets of more than Rp 1 trillion (US$110.25 million) and
financing to deposit ratios (FDR) of less than 80 percent to
increase their minimum reserves with the central bank from the
current 5 percent level.
BI Governor Burhanuddin Abdullah said on Monday that the
decision was aimed at boosting the banks' intermediation roles.
"We hope that sharia banks will increase their financing
ratios to help industry here," Burhanuddin said after being
honored by Bank Muamalat Indonesia for his contribution to the
country's flourishing sharia sector.
He said that the requirement was similar to the one recently
imposed on conventional banks.
Last month, the central bank started requiring conventional
banks to increase their reserves by up to 3 percentage points
from the previous level of 5 percent.
Conventional banks with assets ranging from Rp 1 trillion up
to Rp 10 trillion must increase their reserves to 6 percent,
those with assets of between Rp 10 trillion and Rp 50 trillion to
7 percent, and those with assets in excess of 50 trillion to 8
percent.
These conventional banks are paid interest at a rate of 3
percent on the additional reserves.
However, no interest will be paid to the sharia banks.
"This way, they will be encouraged to boost their
performances, and increase their FDRs so as to avoid this
obligation," said Harisman, the director of Islamic banking at
BI.
Sharia banks operate in line with the principles of Islamic
law. While conventional banks are paid interest by borrowers,
sharia banks take a part of the profits made by borrowers under a
profit-sharing arrangement.
Such banks are starting to proliferate here -- not surprising
given that the majority of the population is Muslim. There are
two dedicated Islamic banks in the country (Bank Muamalat
Indonesia and Bank Syariah Mandiri), in addition to 10 sharia
banking units in conventional banks, such as Bank International
Indonesia, Bank Danamon and Bank Negara Indonesia.
According to Harisman, the total funds deposited with the
sharia banks or units accounted for 0.7 percent of the total
funds in the country's banks.
Burhanuddin added that unlike in the case of conventional
banks, the capital adequacy ratio (CAR) of sharia banks would
include an additional factor: reputation.
"This factor takes into account the question of whether the
bank really abides by sharia regulations. It is a very important
thing for sharia banks as it concerns how they work in accordance
with Islamic law," he said.
No details about how the "reputation" factor would be
quantified were available.