BI's Post-Interest Rate Hike Maneuver: Strengthening Banks, Maintaining Credit
Amidst escalating global geopolitical uncertainties projected to influence market dynamics until the end of 2026, Indonesia’s domestic economic fundamentals are claimed to show solid resilience. The national economic growth rate in the first quarter successfully exceeded 5.61%. This resilience is supported by highly expansive banking intermediation performance, reflected in credit growth nearing double digits at 9.98%, and growth in third-party funds (DPK) at 11.4%.
To maintain growth momentum amidst a high-interest rate cycle, Bank Indonesia (BI) continues to formulate accommodative macroprudential instruments. For banking executives and large-scale business actors, BI’s current macroprudential policy direction provides a very clear signal: the monetary authority is opening the liquidity tap in a measured manner for institutions capable of managing their intermediation functions innovatively.
Executive Official of the Macroprudential Policy Department of Bank Indonesia, Mr Dhaha P. Kuantan, explained this policy architecture through the philosophy of a dam management system. The Statutory Reserve Requirement (GWM) instrument is essentially the primary ‘dam’ where part of the banking liquidity is held at the central bank for monetary stabilisation purposes. However, the water in this dam can be redirected back into the veins of the economy through the Macroprudable Liquidity Incentive Policy (KLM) instrument.
“The GWM essentially involves banking funds placed at BI and held to prevent unregulated circulation. However, this liquidity may be redistributed as long as it is precisely allocated to leveragable sectors that have a large multiplier effect on the economy, such as agriculture, industrial downstreaming, housing, and the MSME segment,” explained Mr Dhaha.
Through a forward-looking mechanism, banks that are able to prepare mature business plans and commit to credit distribution at the beginning of a period will immediately enjoy the easing of GWM obligations. Up to this quarter, the total liquidity injection provided to the banking system through the KLM channel has reached Rp424 trillion, equivalent to 4.76% of total national third-party funds. This represents massive liquidity ammunition for banks that are keen to identify expansion opportunities in priority sectors.
As competition for third-party funds intensifies within the financial industry, Bank Indonesia is also undergoing a paradigm shift in measuring bank intermediation capacity, moving from the conventional Loan to Deposit Ratio (LDR) towards the Macroprudential Intermediation Ratio (RIM). Unlike the rigid LDR, which only compares credit volume to third-party funds, the RIM provides the flexibility in balance sheet management required by modern banking executives. Technically, the RIM formulation integrates Securities (SSB) instruments from both asset and liability perspectives. This transformation signifies that the intermediation function remains recognised and positively assessed by the regulator, even if banks seek alternative funding through the issuance of bonds or corporate securities.
Therefore, limitations in collecting conventional customer deposits should no longer be a structural barrier for banks to remain focused on expansive strategies. As an additional calibration instrument following the 50 basis point hike in the BI Rate on Wednesday (20/5/2026), BI has refined the KLM structure by introducing three new incentive pathways. This tactical step is taken so that bank management can manage the cost of funds more efficiently without sacrificing credit portfolio quality or burdening businesses.
Ultimately, abundant liquidity ammunition from the banking supply side will provide no added value if it is not absorbed by solid credit demand. To break this deadlock, BI is proactively running the PINISI program (Indonesian Intermediation Acceleration). Through this initiative, the central bank is intervening to debottleneck strategic projects. This is a synergistic monetary-scale programme to increase Bank Indonesia’s capability to form a more measurable domestic economic ecosystem. The presence of the PINISI initiative represents a momentum where liquidity in the banking system has been prepared by the regulator; it now depends on the real sector to ensure that business expansions, infrastructure projects, and submitted investment plans possess ‘bankability’. The synergy between banking liquidity readiness and innovation in real sector projects will serve as the primary engine for Indonesia’s future economic growth.