'Private banks will follow state banks move to cut rates'
'Private banks will follow state banks move to cut rates'
JAKARTA (JP): Bank Bali president Rudy Ramli forecast
yesterday that private banks would follow the state banks' move
to reduce national interest rates.
Despite the reserve requirement increase from 3 percent to 5
percent in April, Rudy said, commercial banks would try hard to
cut their lending and deposit rates.
"If Bank Indonesia (the central bank) has tried to bring the
rates down, would you still maintain the current rates or even
increase them?" Rudy asked.
He said the central bank had taken steps to lower interest
rates through several instruments, including reducing the
interest rates of Bank Indonesia Certificates.
The certificates' annual interest rates had dropped from more
than 13 percent in early 1996 to about 12.5 percent at the end of
the year.
The seven state banks pioneered a national interest rate cut
late last year by cutting their deposit rates by between 0.5 and
1 percentage points.
Interest rates on one-month and three-month deposits now stand
at 14 percent and on six-month and 12-month deposits they are 15
percent -- except those offered by publicly listed Bank Negara
Indonesia (BNI) 1946. BNI's rates are 13.5 percent and 14.5
percent respectively.
Following the state banks' interest rate cut, Rudy said, Bank
Bali had cut its deposit and lending rates by 1 percentage point
late last year.
Bank Bali's interest rates are now 14 percent on one-month and
three-month deposits and 14.5 percent on six-month and 12-month
deposits. Its prime lending rate is 19 percent.
"Later this month or next month, we will again cut both our
lending and deposit interest rates by 1 percentage point," Rudy
said after awarding scholarships to 54 students from several
universities.
Bank Bali's deposit rates are now the lowest among private
commercial banks. Interest rates at other leading commercial
banks mostly stand at 15 percent for three-month deposits and 16
percent for six-month deposits.
A debate on high lending rates was sparked last year by State
Minister of Research and Technology B.J. Habibie who suggested
that domestic commercial banks halve their interest rates.
He suggested commercial banks reduce interest rates to the
lowest possible level and then, if there were negative impacts,
increase them again.
Most economists, including Soemitro Djojohadikusumo, totally
rejected Habibie's suggestion, arguing that it was totally
unfeasible.
Responding to the debate, the government said it would not
take any drastic measures to reduce interest rates but would
follow market mechanisms.
The Bank Indonesia governor said earlier that the central bank
would continue to influence the market through its market-
friendly instruments so that interest rates could be reduced
further.
Economists questioned the readiness of private banks to cut
interest rates this year considering that they would be forced to
deposit more money at the central bank to meet the reserve
requirement increase next April.
Performance
Ramly reported yesterday that his bank had recorded an
unaudited after-tax profit of Rp 125 billion (US$52.4 million)
for last year, up from Rp 91 billion for 1995.
He projected a similar increase in net profit this year.
The bank plans to open about 100 new branches and offices this
year in 22 cities where it already operates. It also plans to
sell some of its branch offices which do not contribute much
income.
By mid-last year, the bank was ranked sixth in terms of assets
and second in terms of return on equity among the country's
private commercial banks. Its assets were worth Rp 6.6 trillion
at the end of last June. (rid)