Lending rate may drop to 12% by year-end
The Jakarta Post, Jakarta
The bank lending rate is expected to drop to around 12 percent by the end of this year from the current average rate of 15 percent, senior bank Pramukti official Surjaudaja says.
Pramukti, who is also president of medium-sized Bank NISP, said on Tuesday that local banks could reduce lending rates further because they were still higher than international rates, and also because of the declining trend in the Central Bank's benchmark interest rate.
"Bank (lending) rates may reach around 12 percent by the end of this year compared to the current rate of around 15 percent," he was quoted by Antara as saying.
"From the external front, the difference between (bank) rates in Indonesia and overseas is still huge, so there is still room for the rates to go down further," he added.
For the past couple of months, Bank Indonesia has been pushing banks to lower their lending rates to make loans more affordable to the corporate sector, which in turn could help push economic growth.
The demand was made after Bank Indonesia cut its benchmark rate from more than 13 percent earlier in the year to around 9 percent currently. This was made possible mainly because of a relatively benign inflation environment and the rapid appreciation of the rupiah against the U.S. dollar.
But lending rates remain stubbornly high, only declining to around 15 percent from around 19 percent at the beginning of the year.
Several economic ministers want to see lending rates drop to around the 12 percent level.
Meanwhile, state-owned Bank Rakyat Indonesia (BRI) president Rudjito was also optimistic that lending rates would drop further in the near future.
He said that interest rates spread between bank loans and time deposits should shrink to 4-5 percent from the current 8 percent level.
His optimism was also based on a projection of a further decline in the central bank's interest rate.
But many analysts, however, have said that without improvement in the domestic business and investment environment, companies would not be encouraged to seek new loans for new investments. Likewise, banks would also be reluctant to boost loans.