Indonesia' Deposit Insurance Corporation (DIC) cut its the guarantee interest rate by 25 bps - Photo: Special

JAKARTA (TheInsiderStories) – Board of the Deposit Insurance Corporation (DIC) cut its the guarantee interest rate by 25 basis points (bps), said the chairman told media on Tuesday (09/24). The implemented rate is going to apply starting Sept. 26, 2019 to Jan. 24, 2020.

With the cut, the guarantee interest rate for Rupiah deposits at commercial banks will be 6.5 percent, foreign currency deposits at commercial banks will become 2 percent, and Rupiah deposits at People’s Credit Banks will be set at 9 percent.

Chairman of DIC’ board of commissioners Halim Alamsyah explained, the powering of deposit guarantee interest rate based on several considerations, such as a gradual decline in bank deposit rates after monetary policy rates, the improvement of banking liquidity, and stable financial system conditions.

Furthermore, said Alamsyah, the agency will evaluate and adjust the guarantee interest rate policy in accordance with the development of bank deposit interest rates and the assessment results.

He rated, that bank’ deposit interest rates currently show a gradual downward trend after the monetary policy rate cut. He mentioned, deposit rates at 62 rupiah benchmark banks were observed to have decreased by 17 bps to 5.69 percent.¬†While, foreign currency deposit rates at 19 banks also declined 5 bps to 1.23 percent.

“After the reduction in monetary policy rates (BI-7DDR) by 75 bps and the Fed by 50 bps during July-September 2019, banks gradually began to respond by adjust to deposit rates, especially time deposits,” said the chairman.

On the other hand, the distance margin component which represents the intensity of competition between banks shows a stable trend. This condition is expected to continue and affect the guarantee interest rate policy going forward.

Alamsyah sees that the room for further decline in bank deposit interest rates is quite open considering that the adjustment process for BI 7DRR is still ongoing. The improvement in depositor funds followed by adjustments to credit growth was able to reduce the growth gap so that the condition of bank liquidity was relatively improved.

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