JAKARTA (TheInsiderStories) – Bank Indonesia (BI) raised the macro prudential intermediation ratio limit for commercial banks and islamic banks to 84-94 percent from the previous rule of 80-92 percent. The regulation is expected to support bank lending at the level of 10-12 percent in this year, said BI’ senior officer on Monday (01/04).
The central bank’ deputy governor Erwin Rijanto revealed, currently there are still 21 banks that have macro prudential intermediation ratio below 80 percent and 37 other banks with macro prudential intermediation ratio in the range of 80-92 percent. He hopes that with this easing, banks that have a macro prudential intermediation ratio below 80 percent can increase their ratio so that there will be an additional loan of Rp36 trillion (US$2.55 billion) for this year.
“It is this easing that will make credit growth later this year close to the upper limit,” he said.
Executive Director Macro Prudential Policy Department of BI Linda Maulidina added, this rule gives flexibility to the banks which tight liquidity to channel loans through the purchase of corporate securities.
The reasoned, banking sector currently having a tendency to invest its funds in issuing corporate bond rather than channel loans to the corporate sector. Through these rules, banks also can get fund not only from deposits but also through the issuance of securities.
While, deputy director for Macro Prudential Policy Department of BI Susi Wandayani stated, that the types of securities that can be calculated in the macro prudential intermediation ratio are in the form of medium term notes and bonds, except subordinated bonds.
These securities can be owned by residents or non-residents and are offered through a public offering and administered through the Indonesian Central Securities Depository.
The new rule of this macro prudential intermediation ratio will come into force on July 1, 2019. Banks that do not meet this rule will be subject to sanctions in the form of an additional reserve requirement of 0.1 percent for unmet bottom limits.
In addition, a 0.2 percent additional reserve requirement will be given for the excess balance if it exceeds the upper limit. Sanctions for the upper and lower limits does not need to be fulfilled if bank ha a minimum capital adequacy ratio of 14 percent.
Maulidina said the sanctions will be implemented as of Oct. 1, 2018, even though the rules will be implemented on July 1, 2019. The pause is given so that banks have the opportunity to adjust the system in order to report compliance with the ratio.
Until February 2019, the bank’ loan growth grow significantly 12.13 percent and deposits grew 6.57 percent on the same period. This growth was supported by the increasing of investment and regulator hoped it will impact to the economy in the future.
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