Open Market Operation - Bank Sentral Republik Indonesia
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August 17, 2017
​​Monetary Operation : Open Market Operations

 

Open Market Operations (OMO) are parts of monetary operation which are implemented to achieve O/N interbank rate as the operational target of monetary policy. Open Market Operations are divided into the two following categories:

  1. Contractionary OMOs
    Contractionary OMOs are launched if the liquidity projection or the interbank interest rate indicator points to excess liquidity on the money market. One indicator of this is a sharp drop in interbank money market rates. The instruments used in contractionary OMOs are (i) SBI and SBIS issuance, (ii) Reverse Repo of Government Securities (SBN) transactions, (iii) Outright sale of Government Securities (SBN), (iv) Term Deposit and (v) Foreign exchange selling transactions against Rupiah. The counterparts on contractionary OMOs are banks and/or brokers that conduct transactions on behalf of the banks.

     

  2. Expansionary OMOs
    Expansionary OMOs are launched if the liquidity projection or the interbank interest rate indicator points to a liquidity crunch on the money market. One indicator of this is a sharp rise in interbank money market rates. The instruments used in expansionary OMOs are (i) Repo transactions, (ii) Outright purchase of Government Securities (SBN) and (iii) Foreign exchange buying transactions against Rupiah. The counterparts on expansionary OMOs are banks and/or brokers that conduct transactions on behalf of the banks.

In addition to open market operation, other instruments that can be used to absorb liquidity in the market are foreign exchange sterilization and application of statutory reserve requirement. Forex sterilisation is an activity conducted by Bank Indonesia on the forex market to safeguard the stability of the rupiah, while the statutory reserve requirement is the minimum amount that must be maintained by the bank in the amount stipulated by Bank Indonesia to a certain percentage of deposits.

OMO instruments and its impact on liquidity

Instruments and descriptions

Liquidity Absorption

Liquidity Injection

SBI Issuance

SBIS Issuance

Rev​erse Repo of SBN

Term Deposit

Outright sale of SBN

FX Selling against IDR

Repo

Outright purchase of SBN

FX Buying against IDR

Dampak likuiditas

Reducing liquidity

Expanding liquidity

Frekuensi transaksi

Regular

Non-Regular

Non-Regular

Jangka waktu

1 to 12 months    (stated in days)

1 day to 12 months (stated in days)

-

FX Swap up to 12 months

1 day to 12 months (stated in days)

-

FX Swap up to 12 months

Nominal pengajuan minimal

Rp1,000m

-

Rp1,000m

-

Nominal kelipatan

Rp100m

-

Rp100m

-

Mekanisme transaksi

VRT bidding

Non-competitive bidding

VRT bidding

VRT and/ or FRT bidding

VRT and/ or FRT bidding

-

VRT and/ or FRT bidding

VRT and/ or FRT bidding

-

Setelmen

up to T+1

T+0

up to T+1

up to T+1

up to T+2

T+2

up to T+1

up to T+2

T+2

Peserta

Banks and/or Brokers

Sharia Banks or Divisions

Banks and/or Brokers

Banks

Banks and/or Brokers

Banks

Note :

  • Before 7 July 2010, Term Deposit called Fine Tune Kontraksi (FTK)
  • Before 7 July 2010, Repo called Fine Tune Ekspansi (FTE)
  • VRT: Variable Rate Tender
  • FRT: Fixed Rate Tender
  • FX: foreign exchange
  • SBI: Sertifikat Bank Indonesia (Bank Indonesia Certificates)
  • SBIS: Sertifikat Bank Indonesia Syariah (Sharia Bank Indonesia Certificates)
  • SBN: Surat Berharga Negara (Government Securities)​

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