JAKARTA (TheInsiderStories) – The Indonesian government said it will do its part to push down banks’ lending rates as a move to stimulate economic growth. The statement was made by a senior economic minister following Bank Indonesia’s decision on Thursday, to further cut benchmark BI Rate, by 25 basis points to 7 percent.
“Everyone realizes the need to take bold steps to drive the economic growth to be higher in a situation where the global economy slows down,” Coordinating Minister for Economic Affairs Darmin Nasution told reporters Thursday (Feb. 18).
He said without significant steps, it will be difficult to push the economic growth.
He said the government has taken a number of steps to stimulate growth, including the development of infrastructure projects, speed up the government expenditures, deregulation packages and last but least is reducing interest rates.
“This (reducing rates) has become a commitment by the government, the central bank and the Financial Services Authority (OJK). Each plays its part according to its role. Therefore, the central bank’s decision to cut BI rate is in line with the government’s aspiration,” he said.
He noted BI has decided to reduce BI rate, FASBI rate as well as minimum deposits park at the central bank (GWM).
He said the government is encouraging state owned companies and government agencies not to seek higher deposit rates for parking their funds in the banking industry. If they ask higher deposits rates, it would be difficult for banks to reduce lending rates.
He said OJK will also play its part. OJK is expected to issue polices that stimulate private banks not to offer higher deposit rates. If their deposit rates is lower, than the lending rates could also be pushed down.
Currently, some large depositors are asking for deposit rates as high as 8 percent, which certainly raise banks cost of funds and hamper the government’s efforts to push down lending rates.
Darmin said the government wants lending rates to be pushed down to below 10 percent or single digit, as happened few years ago.
On Thursday, BI governor Agus Martowardoyo said the central bank projects lending rates to grow by 14 percent this year in line with the concerted efforts by the fiscal and monetary authorities to reduce rates.
In 2015, the central bank projected lending growth in a range of 11-13 percent. The realized lending growth is yet to released by the central bank or OJK. (*)