OJK urges banks to anticipate risks in 5 per cent maximum interest credit programme
The Financial Services Authority (OJK) has requested the banking sector to remain vigilant against the potential risk of deteriorating credit within the People’s Credit programme, which features a maximum interest rate of 5 per cent, by maintaining adequate provisioning in accordance with applicable regulations.
Furthermore, banks are urged to continue applying the ‘5C’ principles—character, capacity, capital, collateral, and condition of economy—during the credit disbursement process to ensure the quality of financing remains stable.
“In anticipating potential credit risks from this programme, OJK encourages strengthened supervision and the implementation of regular stress tests to ensure that capital adequacy and asset quality are maintained across various economic scenarios,” stated Dian Ediana Rae, OJK Executive Head of Banking Supervision, in a written response in Jakarta on Monday.
OJK views the government’s initiatives as aimed at delivering programmes that have a positive impact on driving the national economy. The People’s Business Credit programme initiated by the government is considered an excellent opportunity for banks to engage in sustainable business, allowing low-income and unbankable communities to benefit continuously.
Considering this, Dian explained that banks need to enhance the quality of governance and risk management when executing the programme to ensure it remains sustainable and aligned with the bank’s risk appetite and expertise.
“OJK also continuously coordinates with the government and other stakeholders to ensure the implementation of the People’s Credit Programme is well-targeted, properly mitigated, and operates in a healthy and sustainable manner,” added Dian.
Regarding banking interest rates, the weighted average interest rate for Rupiah credit in March 202_ [Note: original text contains future dates 2025/2026, treated as reported data] was recorded at 8.76 per cent, showing a downward trend compared to February and March of the previous year, which were 8.80 per cent and 9.20 per cent respectively.
This decline was driven by a decrease in the weighted average interest rates for productive credit; both working capital credit and investment credit experienced year-on-year decreases of 67 bps and 68 bps, falling to 8.00 per cent and 7.90 per cent respectively.
The reduction in Rupiah credit interest rates aligns with a year-on-year decrease in the weighted average of Rupiah third-party funds (DPK) by 55 bps to 2.66 per cent, also contributed by the decline in the BI-Rate over the past year from 5.75 per cent to 4.75 per cent.
Dian stated that, generally, a reduction in the BI-Rate is responded to by banks through lower credit interest rates; therefore, credit interest rates are expected to remain on a downward trend. However, the extent of interest rate reductions at individual banks will depend on their specific strategies and cost structures, particularly regarding the cost of funds (CoF).
“For this reason, the banking sector needs to manage their funding strategies, specifically to increase the proportion of low-cost funds, which will create space for lowering credit interest rates. Additionally, efforts to further reduce interest rates should continue to take into account geopolitical conditions and global economic dynamics,” concluded Dian.