New Rules in Force, These Banks Face Operational Shutdown

The Financial Services Authority (OJK) has officially tightened capital requirements for Rural Banks (BPR) through OJK Regulation (POJK) Number 7 of 2026. The regulation, which comes into effect on 30 June 2026, requires BPRs to meet a minimum core capital of IDR 6 billion, with the threat of severe sanctions including restrictions on business activities for banks that fail to comply. Chief Executive of Banking Supervision at OJK, Dian Ediana Rae, stated that the policy was issued to strengthen the competitiveness of the BPR industry by improving capital quality. “Through strong capital, it is hoped that BPRs can increase their competitiveness, perform their intermediary function well, and absorb risks arising from their operational activities,” Dian said in a written statement. According to Dian, capital strengthening is expected to enable BPRs to achieve a larger scale of business (economies of scale) so they can survive amidst increasingly tight competition in the banking industry. This new rule also adjusts capital provisions to align with the latest regulatory developments and accounting standards. POJK Number 7 of 2026 replaces POJK Number 5/POJK.03/2015. In the latest regulation, the OJK provides several options for BPRs to meet the minimum core capital requirement, including through additional paid-in capital or donated capital in the form of fixed assets such as land and buildings that meet the requirements. Additionally, the regulator is providing relaxation in the form of an extended period for completing administrative requirements for additional paid-in capital. The OJK has also updated the capital components by including the balance of fixed asset revaluation surplus as part of core capital. On the other hand, the OJK has reinforced the enforcement mechanism against BPRs that have not met the minimum core capital obligation. Based on Article 24 of POJK Number 7 of 2026, BPRs that have never met the minimum core capital of IDR 6 billion before this rule came into effect will be immediately subject to administrative sanctions. Meanwhile, Article 25 stipulates that BPRs which previously met the minimum core capital of IDR 6 billion but whose capital subsequently falls below that threshold are required to restore their core capital to the minimum level of IDR 6 billion within a maximum period of six months. If this obligation is not fulfilled by the specified deadline, the BPR will be subject to administrative sanctions. The forms of sanctions include not only written warnings but also temporary suspension of some operational activities, a ban on business expansion, a ban on raising new funds and disbursing new credit, a ban on distributing dividends, and restrictions on providing allowances or facilities for commissioners, directors, and executive officers. With the enactment of POJK Number 7 of 2026, the OJK hopes that all BPRs will immediately strengthen their capital structures to remain compliant with regulatory provisions, maintain business resilience, and be able to perform their intermediary function optimally in the national banking sector.