Domestic banks will raise lending rates, for now
Domestic banks will raise lending rates, for now
Urip Hudiono, The Jakarta Post, Jakarta
A wide interest margin and tighter competition in the industry
will still help hold off banks from raising their lending rates
despite a recent hike in Bank Indonesia's benchmark interest rate
(SBI).
Banking expert Fendi Susiyanto said on Sunday that banks would
not likely follow the central bank's move as the industry's
interest margin -- the spread or difference between the central
bank's benchmark interest rate and the banks' lending rates --
was still between 4 percent and 6 percent.
"Such a margin is still high compared to other countries, or
even compared to the level of between 2 percent and 2.5 percent
before the 1997 financial crisis," he said.
"Banks can therefore still manage by simply sacrificing a part
of that margin."
The banks, Fendi said, also saw the costs for funding their
third-party liabilities were unaffected by BI's recent benchmark
interest rate hike. The interest rate for savings and time
deposits still stands at between 6 percent and 8 percent.
The interest margin, cost of funds and overhead costs, are
among the four factors used by banks in determining their lending
rates, besides a credit's level of risk.
Bank Indonesia raised its one-month benchmark promissory notes
(SBI) interest rate from 7.44 percent to 7.53 percent last week
to help curb the country's rising inflation rate, and said it
would continue raising the rate to 8 percent over the year.
The Central Statistics Agency (BPS) reported first quarter
inflation at 3.19 percent -- or an on-year inflation of 8.81
percent -- on the back of the government's decision to hike
domestic fuel prices on March 1.
Higher lending rates could hamper the corporate sector's
borrowing from banks, slowing down their businesses and hurting
the whole economy.
Fendi also said the banks were currently experiencing tighter
competition in netting new debtors, making them more careful in
setting a too-high lending rate.
His analysis was affirmed by major bank officials, who said
they would not raise their lending rates in the near future.
Bank Central Asia (BCA) director Jahja Setiaatmadja said the
bank had no plans yet to raise its lending rates.
"Our cost of funds has not been affected yet, so we see no
reason to raise our rates," he said, adding that BCA had even
lowered its lending rate for small and medium enterprises from 12
percent to 11.5 percent.
Jahja, however, said BCA would have to rethink the its lending
rates if the SBI rate reached more than 8.5 percent.
Meanwhile, Bank International Indonesia (BII) director Sukatmo
Padmosukarso said the bank could still avoid raising its lending
rates by sacrificing its interest margin and cutting down its
operational costs.
Bank Niaga president director Peter B. Stok said the bank
would maintain its current lending rates as the SBI rate rise was
not yet significant in terms of the effect on business.
"A spread of between 4 percent and 4.5 percent is still
tolerable," he said, adding that Bank Niaga booked a net interest
margin of 5.36 percent last year. (002)