BI won't hike reserves requirement in near future
BI won't hike reserves requirement in near future
The Jakarta Post, Jakarta
The central bank said on Friday it would not increase anytime
soon the current 5 percent minimum reserves requirements for the
country's commercial banks.
Bank Indonesia deputy governor Maulana Ibrahim said any
increase would require further study and "would not be
implemented in the near future".
"It is still a plan, we still need to examine it carefully,"
he said.
"A hike (in the reserves requirement) would increase the cost
(of funds) for banks, and would lessen the amount of money
available for people to make transaction because more funds will
be kept within the central bank," he said.
Maulana also promised that the central bank would first
discuss such a plan with the banking industry.
Earlier reports said the central bank was considering
increasing the minimum reserves requirement in a bid to control
the currency in circulation, particularly during the elections
period when political parties are spending large amounts of money
on their campaign activities.
Controlling the money in circulation is necessary to reduce
inflationary pressure.
For the past year, inflation has been generally low, thanks
mainly to the stronger rupiah and lower food prices. The
relatively benign inflation environment has allowed the central
bank to aggressively cut down its benchmark interest rate, now
hovering at a new record low of 7.86 percent. The lower interest
rate, in turn, has triggered banks to cut their lending rates,
making lending more affordable to the corporate sector.
However, banks have generally remained reluctant to boost
lending to the corporate sector for a number of reasons,
including lingering risks in the corporate sector amid a lack of
progress in the restructuring of corporate debts.
A number of analysts have criticized to the planned increase
in the reserves requirement, saying it would only discourage
banks from boosting their lending.
Asked how long would it take Bank Indonesia to review the
proposal, Maulana said the study would be conducted by the
central bank's research division, and "until now there has been
no presentation from them (the research unit) on the matter".
The current minimum reserves requirement requires banks to set
aside 5 percent of their outstanding third-party funds as
reserves in Bank Indonesia. The reserves requirement can serve as
a monetary policy tool for the central bank: it can be raised
when the central bank want to adopt a tighter monetary policy, or
it can be lowered.