Tight money policy causes banks to raise rates
JAKARTA (JP): Most commercial banks are increasing their one- month time deposit rates to over 30 percent to draw more liquidity from the public to survive the current tight money policy.
A foreign exchange bank dealer said yesterday that starting today state banks would start increasing their on-counter, one- month deposit rates to 30 percent, two-to-three-months to 28 percent, and six-to-12-months to 19 percent.
"Private banks usually raise their deposit rates by one or two percentage points higher than state banks in order to remain competitive," the dealer said.
He said the rate increase was normal following Bank Indonesia's (the central bank) move Tuesday to raise one-week-to- three month bilateral Bank Indonesia Certificates (SBI) to soak up excess liquidity in the market.
Bank Indonesia raised one-week SBI rates to 20 percent from 10.5 percent, two-weeks to 22 percent from 11 percent, one-month to 30 percent from 11.625 percent and three-months to 28 percent from 11 percent.
Publicly listed Bank Rama president Putu Antara, who is also chairman of the Bankers Club Indonesia, said, "as Bank Indonesia has increased interest rates, private commercial banks will follow suit automatically".
He said the most common practice among private banks was to increase time deposit rates by three percentage points above SBI rates.
Besides the SBI rates, Putu said private banks would determine their rate increase according to the market's prevailing rates.
"If several banks increase their rates to 30 percent, other banks will definitely follow suit," Putu told The Jakarta Post.
Putu agreed the tight monetary policy was necessary to prevent the rupiah from further declining against the American greenback.
"The central bank has made a wise move," he said.
But Putu warned that the immediate impact of the tight monetary policy was the increase in lending rates imposed by most banks.
As of yesterday, most commercial banks had already increased their on-counter deposit rates. Large banks increased their rates by a smaller percentage point than small banks.
State-owned Bank Dagang Negara, for example, increased one-to- three-month deposit rates to 20 percent, six-month to 14 percent and 12-month to 14.5 percent.
Bank Dagang Nasional Indonesia of the Gajah Tunggal group raised one-month deposit rates to 24 percent, three to 22 percent and six-to-12-months to 17 percent.
Bank Tamara increased one-, three- , six- and 12-month deposit rates to 17 percent from 15 percent.
Bank Bira raised its short-term rates -- one-week to one-month rates -- to between 25 percent and 30 percent.
Bank Bali raised its one-month rate to 25 percent, two to 23 percent, three to 22 percent, and six-to-12-months to 16 percent.
ABN Amro Bank increased the one-month deposit rate to 30 percent, three-month to 23 percent and six-to-12-months to 18 percent.
Bank of America raised the one-month rate to 20 percent, three-months to 16 percent and six-to-12-months to 15 percent.
One-month deposit rates at Bank Indo Monex were also raised to 24 percent, three-months to 22 percent, six-to-12-months to 17 percent. Other small banks also joined the deposit rate increase.
Overnight on-call rates increased to between 70 percent and 100 percent, one-week to between 50 percent and 60 percent and one-month to 50 percent.
"But foreign banks offered 65 percent for one-month on-call deposits. They upset the market because local private banks could not compete with them," the dealer at a local bank said.
"They charged higher rates because they have a smaller number of depositors and because on-call rates are still cheaper than swap premiums," he added.
He said the one-month dollar to rupiah swap rate reached 180 points yesterday, two-month 225 points, three 290 points, six 385 points and 12-month 535 points. (aly/rid)