Rupiah Weakens, Banks Face Risks to Performance and Asset Quality

The Garuda currency, increasingly losing its bite, appears to require attention from the banking sector. Citing Bloomberg, the rupiah in the spot market closed at Rp17,387 per US dollar on Wednesday (6/5/2026). This position reflects a 3.96% weakening since the beginning of the year. Economist from the Center of Reform on Economics (CORE) Indonesia, Yusuf Rendy Manilet, states that the rupiah’s weakening will impact the banking industry through at least three channels. The first comes from the asset side. Banks holding foreign currency assets, especially US dollars, benefit from rupiah depreciation as the value of those assets increases in rupiah terms. However, this gain could be offset if banks have significant US dollar liabilities. The second impact comes from debtors. As the rupiah weakens further, corporate customers with US dollar debts but rupiah-denominated revenues will immediately feel pressure on their cash flows. “Sectors dependent on imports are most vulnerable. At this point, risks begin to shift from the bank’s balance sheet to credit quality,” Yusuf explained to Kontan on Wednesday (6/5/2026). The third is liquidity and funding structure. Yusuf said the transmission of the rupiah weakening’s impact to bank liquidity and funding is relatively slow. These impacts are certain to emerge gradually if the rupiah enters an extreme scenario. “For example, if the rupiah truly approaches Rp20,000 per US dollar,” he said. Yusuf also highlighted additional pressure from the provisioning side, where current accounting standards force banks to anticipate future risks. The industry seems to be preparing for the worst-case scenario. For instance, PT Bank Negara Indonesia Tbk (BNI) has conducted stress tests with the worst scenario, namely the rupiah exchange rate weakening above Rp20,000 per US dollar, oil prices reaching 150 US dollars per barrel, and the 10-year government bond yield breaching 9%. BNI’s President Director, Putrama Wahju Setyawan, stated that in that scenario, BNI’s non-performing loan (NPL) ratio is predicted to increase by around 1.6%, cost of credit (CoC) to rise by about 1.1%, and net interest margin (NIM) to be pressured to a low level of 3%. For context, as of the first quarter of 2026, BNI’s NPL position is at 1.9%, CoC at 1.1%, and NIM at 3.6%.