Bank Indonesia will ease reserve rules for banks in November and December while lifting its deposit rate, a combination it says will support rupiah stability and keep credit flowing.
At its Oct. 20-21 meeting, the central bank kept the BI-Rate at 5.75% and the Lending Facility rate at 6.50%, while raising the Deposit Facility rate to 5.00% from 4.75% in September. At a BI briefing, Firman Mochtar, the central bank’s head of economic and monetary policy, said the Deposit Facility rate is 75 basis points below the benchmark and the Lending Facility rate is 75 basis points above it, ANTARA reported.
BI plans to lower the average reserve requirement for conventional commercial banks from 9% to 8% on Nov. 1, then to 7% on Dec. 1. For Sharia commercial banks and Sharia business units, the scheduled reductions are from 7.5% to 6.5% on Nov. 1, then to 5.5% on Dec. 1. The central bank also plans to cut its Macroprudential Liquidity Incentive Policy from 6% to 5% on Dec. 1, saying the measures will give banks more flexibility to support lending.
The policy comes as lending has expanded faster than bank funding. BI reported that lending grew 13.26% year over year in September, compared with 8.22% growth in third-party funds. September consumer-price inflation was 3.28%, within the central bank’s 2026 and 2027 target of 2.5%, plus or minus 1 percentage point.
BI also increased premium reductions for its Domestic Non-Deliverable Forward hedging instruments: from 25% to 40% for six-month tenors and from 30% to 45% for 12-month tenors. The central bank said the incentives are intended to attract foreign capital and support the rupiah. Reuters reported that some economists described the combination of rate and liquidity measures as confusing.
The first reserve requirement cuts are scheduled for Nov. 1. The next reductions, along with the lower liquidity incentive policy rate, are due Dec. 1.
