​No. 23/158/DKom

The bank intermediation function is showing early signs of improvement, recording a shallower -1.28% (yoy) contraction in May 2021.  The broad recovery has touched all segments, led by consumer loans and MSME loans, which expanded 1.39% (yoy) and 1.70% (yoy) in the reporting period, as well as housing loans that accelerated to 6.61% (yoy).  Solid housing loan growth is in line with property sales, driven by BI efforts to relax the loan-to-value (LTV) ratio on such loans along with lower interest rates as well as tax incentives introduced by the Government.  In response to the recent spike in Covid-19 cases since the middle of June 2021, corporate and household performance is being monitored carefully.

Meanwhile, the trend of lower prime lending rates (PLR) in the banking industry has continued as the cost of funds comes down in line with BI7DRR reductions.  From April 2020 to April 2021, prime lending rates fell by an average of 177bps to 8.87%. Such developments are consistent with BI policy since the BoG Meeting in February 2021 to publish the “Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry” as a way to accelerate effective monetary policy transmission and simultaneously expand information dissemination to corporate and individual consumers, thus enhancing governance, market discipline and healthy competition in the loan market.  On the other hand, the high-risk perception prevalent in the banking industry continues to stifle reductions in lending rates on new loans.

Moving forward, Bank Indonesia will maintain an accommodative macroprudential policy stance, focusing on three salient aspects. First, accelerating intermediation and the economic recovery by: (i) constantly monitoring and evaluating existing policies concerning the lower loan-to-value (LTV) ratio of property loans, downpayment requirements on automotive loans and Macroprudential Intermediation Ratio (MIR); and (ii) strengthening PLR transparency in the banking industry to enhance policy rate transmission effectiveness.  Second, maintaining adequate liquidity in the banking industry by constantly monitoring and evaluating existing policies concerning the Macroprudential Liquidity Buffer (MPLB), lower reserve requirements and Countercyclical Capital Buffer (CCB).  Third, expanding access to finance for MSMEs and other inclusive sectors.  In addition, Bank Indonesia will continue to strengthen macroprudential policy support as well as inter-authority policy coordination targeting priority sectors, while actively pursuing the Integrated Policy Package issued by the Financial System Stability Committee to revive corporate sector financing.

Jakarta, 2nd July 2021

Head of Communication Department

Erwin Haryono

Executive Director

Information about Bank Indonesia

Tel. 021-131, Email: bicara@bi.go.id