Onshore banks can make overdraft transaction: BI

JAKARTA (JP): Bank Indonesia deputy governor Miranda Goeltom said on Thursday the central bank would allow onshore banks to lend rupiah to offshore banks through the intraday overdraft facility.

But Miranda said banks must have the Message Type (MT) 210 document before making such transactions.

"As long as a bank already has the MT210 supporting document, it can make the rupiah transfer," she said during a media conference.

"The transfer must not surpass the limit set in the MT210," she added.

The MT210 document is basically a confirmation from a bank that it will transfer funds to a recipient bank using the exchange rate that same day.

"But please do not see this as us loosening the (forex) ruling ... it is a common banking practice to make transfers after obtaining the MT210 document," Miranda said.

Miranda was answering questions about a Bank Indonesia circular containing details of its new foreign exchange ruling, which limits rupiah transactions between onshore banks and nonresidents.

Those categorized as nonresidents are foreigners, foreign institutions, Indonesian citizens with permanent overseas resident status and overseas branches of Indonesian companies.

The new ruling is aimed at limiting the offshore availability of rupiah to help curb speculation on the ailing local currency.

The forex ruling has caused some initial confusion among foreign bankers.

The ruling, issued on Jan. 12, had stated that banks operating in the country were not allowed to make overdraft transactions with offshore banks.

Bank Indonesia initially failed to provide details of the ruling.

Miranda also said that branches of foreign banks in the country and foreign investment companies set up under Indonesian law would be treated as residents.

She added that nonprofit international organizations such as the IMF, Unicef and the International Red Cross also were categorized as residents.

The new forex ruling stipulates that onshore banks are prohibited from making certain transactions with nonresidents, including foreign institutions.

The transactions prohibited include provisions of credit and overdrafts in rupiah and or foreign currencies to nonresidents; placement of funds in rupiah with nonresidents, including rupiah transfers to banks abroad; purchases of securities in rupiah issued by nonresidents; and interoffice transactions in rupiah.

Under the ruling, a US$3 million cap has been put on derivative transactions without any underlying investment purposes between banks and nonresidents. It was previously set at $5million.

The restriction does not apply when carried out for the purpose of protecting the value of investments, including direct investment, securities purchase and credit provisions in Indonesia by nonresidents.

Miranda said residents who have outstanding rupiah commitments to nonresidents may still conduct the necessary transactions until next week.

"The last day is Feb. 7, as long as the rupiah is transferred to a bank account in Indonesia," she said.

Miranda said there were indications the new forex ruling had helped stabilize the rupiah.

"The rupiah is now less volatile," she said, pointing out that despite the continuing domestic political uncertainty the rupiah was still hovering at around Rp 9,400 to the U.S. dollar.

She said that in the past the rupiah was more sensitive to large demonstrations.

The rupiah fell to Rp 9,525 to the dollar late on Thursday from Rp 9,450 on Wednesday amid massive student demonstrations and a House plenary session over two financial scandals allegedly involving President Abdurrahman Wahid. (rei)