Rise in BI Rate Does Not Directly Slow Credit Growth
Markets view President Prabowo’s speech and BI policy positively. The rise of the policy rate or BI Rate by 50 basis points to 5.25% is not yet yet driving banks to raise deposit or lending rates. The banking industry still sees relatively loose liquidity, so room for policy adjustment remains open.
Director of Branch Business Hana Bank, Hendri Setiawan, said Bank Indonesia’s move to raise the BI Rate is understood as part of efforts to maintain stability of the rupiah’s exchange rate, which has been pressured by global dynamics.
“From what I see, this is related to our currency which has continued to rise. That is one of BI’s instruments to guard the forex,” Hendri said at Hana Bank’s Media Gathering in Jakarta, Thursday (21/5).
According to him, theoretically a BI Rate increase is usually followed by adjustments in deposit rates because depositors tend to demand higher returns. However, he sees the current conditions as different because banking liquidity remains strong. He notes banks will not automatically respond to the policy rate increase by lifting deposit rates because credit growth is still tepid.
“If the cost of funds rises, of course credit rates will also rise. That is the risk,” he said.
He explained that higher funding costs can ultimately affect the loan costs borne by debtors. The situation, he added, could potentially affect credit demand, especially as purchasing power remains under pressure. Nevertheless, Hana Bank says it has not yet seen liquidity or credit disbursement problems. The company will continue to monitor market developments and customer behaviour in the short term before taking further steps.
“We will continue to see how customers and the market respond,” he said.
Hendri noted that monetary policy today also presents its own challenges because, on the one hand, Bank Indonesia seeks to maintain macroeconomic stability, while the government pushes for growth through increased credit disbursement.
He believes a balance between monetary stability and growth must be maintained so that the economy’s slowdown does not deepen further.
Although various economic policies and the dynamics of the commodities sector could affect business activity in the second quarter of this year, the banking sector remains optimistic about credit growth prospects.
“We remain confident about credit developments this year. So far there are no plans to revise targets,” he concluded. (E-3)
The Indonesian capital market is responding to BI’s latest policy rate hike.
The Fed holds rates at 3.5%-3.75%. Economists warn RI needs strong monetary policy and fiscal discipline to sustain Rupiah stability.
The IHSG closed down 2.16% to 7,378.61 as the rupiah breached Rp17,300 per US dollar and global oil prices rose. Read full analysis.
Bank Indonesia held rates at 4.75% and strengthened market intervention to protect the rupiah amid global uncertainty and world economic pressures.
The IHSG today is expected to move variably as market participants remain cautious awaiting the direction of the central bank’s policy rate.
BI Governor Perry Warjiyo urged banks to improve efficiency so that lending rates can stay anchored even as the BI Rate rises to 5.25 percent.
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OJK notes that bank lending in February 2026 grew by 9.37% to Rp8,559 trillion year-on-year.