2022 State Budget: Fiscal Policy and Structural Reform
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 decline in the prime lending rate (PLR) continues, although in a limited
scale. The cost of loanable funds (CoLF) remains the primary contributor to
lower prime lending rates. On the other hand, profit margins have shown an
increase, especially in the national commercial private banks.
In line with the decline in the PLR and the improvement in perception of
banking risk, interest rates for new loans continue to show a downward
trend (year on year).
• Big Banks have responded to the reduction in BI7DRR by further lowering
new loan interest rates. The decline in interest rates for new BB loans
mainly occurred in mortgages, followed by working capital loans and MSME
loans.
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.
1 Assessment period until September 2021.
Source: Bank Indonesia
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, BI7DRR and 1-Month Term Deposit Rate Performance
17
10
Я
6
4
2
0
2019
Spread (SBDK-BI7DRR)
SBDK
BI 7 DRR
Graph 2. Prime Lending Rates by Bank Group
14
12
12
10.22
5.22 5.22
2020
2021
Spread (SBDK-Sb depo 1 bln)
Deposito 1 bulan
8.77
8.75
3.25 5.47
3.50
3.28
Graph 3. Prime Lending Rate Performance by Component
5
10.36
985
59 11 4
521
ย
6.39
2
342
2009
---H40
же
2021
HAVN
RUSH
9-4
Source: OJK
4.19
3.29
3.24
3.73
2.93
2.97
2.14
2.59
2.56
2019
2020
2021
HPDK
OHC
Margin Keuntungan
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