Economists Highlight Impact of 5.75% BI-Rate on Bank Cost of Funds
Bank Central Asia (BCA) Chief Economist David Sumual believes the 100 basis point (bps) increase in the benchmark interest rate (BI-Rate) during May-June 2026 could potentially raise the banking industry’s cost of funds (CoF) going forward. The cost of funds refers to the expense incurred by banks to raise funds and is one of the main components determining lending rates.
“The cost of funds could increase, especially if the government withdraws funds (SAL placements) previously disbursed to Himbara banks, making liquidity tighter,” David said when contacted in Jakarta on Friday (19/6/2026).
David added that the outlook for credit growth is likely unchanged amid rising demand for working capital loans, even though lending rates tend to rise following the BI-Rate hike.
Contacted separately, PermataBank Chief Economist Josua Pardede also assessed that the 100 bps BI-Rate hike could reverse the direction of banks’ cost of funds, although the increase is likely to be gradual rather than a sharp spike across the entire industry.
He noted that early signs are already visible, with the rupiah third-party deposit (DPK) rate recorded as rising from 2.65 percent in April 2026 to 2.70 percent in May 2026. This increase, Josua said, indicates that competition for fund collection is starting to intensify, particularly because cheap funding sources are limited while credit funding needs remain substantial.
Nevertheless, he believes the pressure on the cost of funds has not yet become a systemic issue because banking liquidity is still relatively adequate. On the other hand, Bank Indonesia (BI) continues to maintain sufficient liquidity through a policy mix, including repo auctions and strengthening banking liquidity instruments.
For context, throughout 2025, BI lowered the benchmark rate five times, totalling 125 bps in cuts. Following those reductions, BI data shows that bank lending rates only fell by 39 bps, from 9.20 percent at the start of 2025 to 8.81 percent in December 2025. As of May 2026, the lending rate was recorded at 8.72 percent and the one-month deposit rate at 4.26 percent.
Josua also observed that the downward trend in the cost of funds that occurred after the 125 bps BI-Rate cuts in 2025 is indeed at risk of reversing in 2026.