JAKARTA (TheInsiderStories) – Bank Indonesia (BI) decided to relaxes the macro-prudential intermediation and loan to value (LTV) ratios to strengthening banking intermediary function. The new policy will be implemented starting Dec. 2, said the central bank on Wednesday (11/27).
The new rules contained in BI Regulation (PBI) No.21/ 12/PBI/2019 concerning 0n Macro-prudential Intermediation Ratio and Macro-prudential Liquidity Buffer for Conventional Commercial Banks, Sharia Commercial Banks, and Sharia Business Unit.
Based on the official statement, BI said, the macro-prudential intermediation ratio (MIR) rule has been replaced with the loan to deposits ratio that only included deposits in the component. In the newest regulation, the Bank adding loan or financing component received by the bank as a bank funding sources in the MIR calculation.
While, the new LTV ratio has been regulate through PBI No. 21/13/PBI/2019 regarding LTV ratio for housing loan and down payment for automotive. The central bank lowering the ratio for housing loan by 5 percent and adds by 5 percent for green housing loan. The rule also applies for second housing loan and pivot house.
Beside giving relaxation for housing loan, BI also relaxes down payment rule for automotive loan by 5 to 10 percent. Similar with housing loan, the rule will be added by 5 percent to green automotive loan.
The rule is the continuation of BI policies, which hold BI-7 days reverse repo rate (BI-7DRR) at 5 percent, deposit facility rate 4.25 percent and lending facility rate 5.75 percent. The Bank wants to boost the economy by using macro-prudential policy including relaxed the reserve requirement for commercial and sharia banks by 50 bps to 5.5 percent and 4 percent, respectively.
BI’ governor Perry Warjiyo stated, “The policy was taken to maintain economy growth amid slowing global economy.”
He continued, through the policies, the bank aimed to drive the loan growth and enlarge financing at the same time stabilizing the financial system. In addition, the policymakers wants to kept the countercyclical capital buffer at zero percent and buffer ratio of macro-prudential policy at 4 percent with repo flexibility at 4 percent.
Going forward, said the governor, BI will monitor global and domestic situation in deciding the monetary policy. Looking at the global situation, Warjiyo rated that the tension between United States (US) and China has impacted the global economy. In this year, the global economy growth is estimated around 3 percent, lower than 2018 level at 3.6 percent.
Even some countries has relaxed its monetary policy by cutting the interest rate, it was not adequate to anticipate the slowdown of global economic growth, he adds. Going forward, Warjiyo saw that the global economy growth getting better, but still cautiously on the tension between the two largest economy in the world.
From domestic, he revealed, the economy growth was still stable at 5.02 percent in third quarter (3Q) of 2019, although lower than 2Q of 2019 of 5.05 percent. He asserted, the government needs to focus on improving the export as the slowing demand and commodity prices.
“The economy growth will be better in 4Q of 2019, in line with seasonal pattern, so the full year’ economy growth will be 5.1 percent,” he conveyed.
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