Indonesia' Deposit Insurance Corporation Predicts the Rupiah and Foreign Exchange Deposit Rates will be Limited in 2019 - Photo: Special

JAKARTA (TheInsiderStories) – The Indonesia Deposit Insurance Corporation (IDIC) has cut its guaranteed interest rate by 25 basis points (bps) on rupiah deposits made by commercial banks and rural banks, the board said on Wednesday (07/31).

The guaranteed interest rate for the rupiah deposits of commercial and rural banks was reduced respectively to 6.75 percent from 7 percent and 9.25 percent, while the rate for foreign currency deposits was maintained at 2.25 percent to maintain the domestic economic stability.

Both rates will be effective from July 31, to September 25, 2019. Besides that, the opportunity to reduce interest rates for guarantees until the end of this year is still quite open, given the relatively improved condition of banking liquidity.

IDIC chairman Halim Alamsyah said the reduction based on several considerations, one of which is the development of banking deposit interest rates observed to be at a stable level and potential to decline.

“In the observation period up to July 2019, the development of deposit market interest rates in the 62 banks that IDIC referred to was observed to experience a decline in Rupiah market interest rates which were observed to decline by 11 bps to 5.94 percent,” Alamsyah told reporters in Jakarta.

Meanwhile, for the foreign exchange market interest rates from the 19 banks that were referred to, it was recorded to only experience a limited increase of 2 bps to 1.26 percent.

On the other hand, Alamsyah said the reduction in guarantee interest rates was carried out because Bank Indonesia (BI) had just lowered its BI 7-day reserve repo rate (BI7DRR) by 25 bps while at the same time easing monetary policy by reducing the Minimum Wajor Giro.

In addition, IDIC saw the condition and risk of banking liquidity were relatively maintained amid the trend of improving deposit growth. The difference in growth in Third Party Funds was mainly driven by the growth of large accounts belonging to the Non-Bank Financial Industry, State-Owned Enterprises, and the private sector. Credit growth is relatively stable, with growth projections of 7.4 percent and 11.7 percent respectively.

“We also see the decline in IDIC guarantee interest rates does not cause the guarantee to decrease. Guaranteed IDIC is at a stable level with guaranteed accounts of 99.91 percent or more than 288 million accounts of the total,” he said.

Alamsyah added, by looking at these conditions, his party approved the reduction in guarantee interest rates. In the future, IDIC will also monitor the development of bank deposit interest rates.

“Because the future changes are still quite dynamic, IDIC will continue to monitor the development of bank deposit interest rates while at the same time evaluating and adjusting the guarantee interest rate policy,” he concluded.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com