OJK: 100 bps BI-Rate Hike Could Slow Lending Rate Decline
Jakarta (ANTARA) - The Financial Services Authority (OJK) views the 100 basis point (bps) increase in the benchmark interest rate (BI-Rate) to 5.75 percent as potentially slowing the decline in lending rates that had been occurring throughout 2025 until mid-2026.
Chief Executive of Banking Supervision at OJK, Dian Ediana Rae, stated that in the short term, banks are likely to be more selective in lowering lending rates, given the increase in the cost of funds.
“Banks will do so in a measured and selective manner, while maintaining a balance between profitability and credit growth. This is important so that the intermediation function continues to run optimally amid still quite high financing needs, as well as to maintain credit quality,” Dian said when contacted by ANTARA in Jakarta on Friday.
Nevertheless, Dian added, transmission to lending rates generally takes place more slowly than to deposit rates, due to considerations of competition, credit quality, and efforts to maintain intermediation growth.
“Therefore, lending rates are expected to remain relatively stable with a limited tendency to increase,” he said.
Dian explained that the 100 bps BI-Rate hike will generally be responded to by banks through adjustments to both lending and deposit rates. Historically, this is a normal market mechanism and banks will adjust pricing in line with their respective cost of fund structures and liquidity conditions.
“Thus, the magnitude and speed of interest rate adjustments (for loans and third-party funds) are not always immediate or uniform across all banks,” Dian said.
He added that banks continue to consider various factors, including internal liquidity conditions, the structure of third-party funds (DPK), the level of competition, customer loyalty, and the capability and risk profile of debtors. Banks also tend to continue optimising low-cost funds (CASA) to maintain cost of fund efficiency.
“Taking these factors into account, the downward trend in the cost of funds that occurred after the 125 bps BI-Rate cut last year, we view that this trend has the potential to moderate or even gradually reverse direction in 2026,” Dian said.
Nevertheless, Dian added, the adjustment is not expected to be sharp, considering that banks will be cautious in order to maintain competitiveness and margin stability.
Dian also confirmed that the OJK continues to encourage banks to maintain efficiency and strengthen liquidity management. In addition, the OJK is urging banks to ensure that interest rate transmission continues to support sustainable economic growth while maintaining financial system stability.
For context, throughout 2025, Bank Indonesia (BI) cut the BI-Rate five times with a total reduction of 125 bps. With that reduction, bank lending rates only fell by 39 bps from 9.20 percent at the beginning of 2025 to 8.81 percent in December 2025. As of May 2026, lending rates were recorded at 8.72 percent and the one-month deposit rate at 4.26 percent.
During the monthly BI Board of Governors Meeting on 19-20 May 2026, the BI-Rate was raised by 50 bps, marking the first adjustment after being held at 4.75 percent since September 2025. However, the rupiah exchange rate continued to weaken, touching the level of Rp18,000 per US dollar, prompting BI to raise the BI-Rate by another 25 bps through a Weekly Board of Governors Meeting on 9 June 2026, outside the regular schedule. Most recently, on Thursday (18/6), during the Monthly Board of Governors Meeting, the central bank decided to raise the BI-Rate by 25 bps. Cumulatively, the BI-Rate increase totals 100 bps within a month, bringing it to the current level of 5.75 percent.