Bank Indonesia Policy Mix
Assessment of Policy Rate Transmission to Prime Lending Rates
in the Banking Industry
Bank Indonesia published the “Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry" to accelerate monetary policy
transmission and expand the dissemination of information to corporate and individual consumers in order to enhance governance, market discipline
and competition in the credit market.
Key Takeaways
•
The banking industry continued to lower prime lending rates (PLR) in
August 2021, despite ongoing rigidity. The cost of loanable funds (COLF)
remains the primary contributor to lower prime lending rates, while profit
margins have stabilised.
• Increasing economic activity and public mobility have improved risk
perception in the banking industry, thus leading to lower interest rates on
new loans across all bank groups, except national private commercial banks.
•
•
Prime Lending Rate and Deposit Rate Response to BI7DRR 1
Bank Indonesia has maintained an accommodative monetary and macroprudential
policy stance in order to stimulate economic growth.
Prior to the Covid-19 pandemic, from June 2019 until Feb 2020, BI lowered
the BI7DRR policy rate five times by a total of 125bps from 6.00% to 4.75%.
From March 2020, Bank Indonesia lowered the policy rate another four times
(100bps) to a level of 3.75% in November 2020, and lower another 25 bps in
Februari 2021 to 3.50%.
In terms of liquidity, accommodative monetary and macroprudential policy
significantly boosted liquidity in the banking industry in order to maintain
financial system stability and the bank intermediation function.
Graph 1 Prime Lending Rate, B17DRR and 1-Month Term Deposit Rate Performance
The banking industry has continued to lower prime lending rates (PLR).
•
By bank group, the lower PLR was primarily driven by regional government
banks, followed by national private commercial banks and foreign bank
branches.
By component, the cost of loanable funds (COLF) was still the main driver of the
lower PLR, contrasting higher overhead costs (OHC).
Pursuant to OJK Regulation (POJK) No. 37/POJK.03/2019 concerning Bank Report
Transparency and Publication, the PLR consists of three components, namely;
i. the cost of loanable funds (COLF), incl. the cost of funds, cost of services,
regulatory costs and other costs;
ii. overhead costs (OHC), incl. labour costs, education and training costs, R&D
costs, rental costs, promotion and marketing costs, maintenance and repair
costs, fixed asset and inventory depreciation costs as well as other overhead
costs; and
iii. profit margin, which is determined by the respective bank for lending activity.
12
10
B
a
B
14
12
10
2
D
2019
Spread (SBDK-BI7DRR)
Deposito 1 bulan.
Graph 2. Prime Lending Rates by Bank Group
10,98
9.87
9.24
8.94
9:82
8,70 8,70
1 Assessment period until August 2021.
Source: Bank Indonesia
2019
2020
BPD
BUMN
Source: OJK
2021
BUSN *******KCBA
2020
.19.24.
6,24
Spread (SBDK-Sb dopo 1 bln) ******* SBDK
B17 DRR
2021
8,81
8,77
5.27
5,43
3,50
3,34
Graph 3. Prime Lending Rate Performance by Component
6
5
8:29
2
4,32
3,33
2,67
2,66
3.203.24
3.052,97
2,56
2019
2020
2021
HPDK
OHC
Margin Keuntungan
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