Five Rate Cuts Yet Limited Impact: Bank Indonesia Acknowledges Suboptimal Credit Transmission

JAKARTA — Bank Indonesia (BI) has provided an update on the impact of benchmark interest rate cuts carried out throughout 2025 on banking sector interest rates. The transmission of monetary policy easing has so far been limited.

Despite BI cutting the benchmark BI Rate five times over the course of 2025, the effect on commercial banking rates has not been optimal. One-month deposit rates fell by only 68 basis points, from 4.81 per cent in January 2025 to 4.13 per cent in January 2026. Meanwhile, lending rates declined by a mere 40 basis points, from 9.20 per cent at the start of 2025 to 8.80 per cent in January 2026.

The BI Governor highlighted the need to accelerate the transmission of rate cuts to both deposit and lending rates across the banking sector. He noted that special rates offered to large depositors still account for 26.42 per cent of total third-party funds (DPK), which continues to constrain the effectiveness of monetary policy transmission.

The central bank has urged commercial banks to more actively pass on the benefits of lower benchmark rates to their customers, both on the deposit and lending sides, in order to support economic growth and credit expansion.