OJK Encourages Regional Development Banks to Compete and Support Government Programmes

The Financial Services Authority (OJK) is encouraging Regional Development Banks (BPD) to strengthen their business through transformation, aiming to make them ‘Regional Champions’ and dominant players in their respective areas. Dian Ediana Rae, Chief Executive of Banking Supervision and Member of the Board of Commissioners at OJK, stated that BPDs must reduce their dependence on regional government budgets (APBD) and loans to civil servants. To compete with national banks, BPDs are urged to understand local culture and potential, developing products tailored to the needs of the regional community. The OJK also supports BPDs in backing central and regional government programmes as a business development opportunity, provided they maintain prudential principles and strong credit analysis. Furthermore, BPDs are encouraged to be creative in gathering third-party funds, given the current funding limitations faced by local governments in driving regional development. The regulator expects BPDs to play a role in enhancing financial literacy and inclusion, reaching remote areas. The OJK is also promoting the consolidation of regional government-owned rural banks (BPR) so they can merge, grow, and synergise with BPDs to boost the Indonesian economy.