2022 State Budget and Fiscal Incentives Presentation
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 marketending Rate and Deposit Rate Response to BI7DRR
Key Takeaways
•
The decline in the prime lending rate (PLR) is becoming more limited and driven by
private banks. The cost of loanable funds (CoLF) remains the main factor affecting
the decline in PLR, while profit margins continue to increase.
The downward trend in new lending rates continues, which occurred in all group of
banks. The decline was driven by improved risk perception, as reflected in a
decrease in risk premium and LaR.
• The spread of new lending rates for large banks is wider than for non-large banks,
as large banks attempted to maintain profitability amidst high credit risk.
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11
10
9
8
7
Б
Pursuant to OJK Regulation (POJK) No. 37/POJK.03/2019 concerning Bank Report
Transparency and Publication, the PLR consists of three components, namely;
5
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.
Graph 2. Prime Lending Rates by Bank Group
Bank Indonesia has maintained an accommodative monetary and
macroprudential policy stance in order to stimulate economic growth.
•
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10
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Graph 3. Prime Lending Rate Performance by Component
6
86
4
3.98
2
3.30
3,23 3,23
0
10.89
9.73
5
8,94 8,99
9.61
8,79 8,75
8.70 8.70
4
6,12 6,13
3
2,86
2,89 2,86
2,59 2,62
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
Jan
Feb
Mar
Apr
Mei
Jun
Inr
Agt
Sep
Okt
ΛΟΝ
Des
Jan
Feb
Mar
10.14
6,39
8,71 8,70
5,63
5,65
5,20
451
3,50
3,75
Des
Jan
Feb
Mar
3,17 3,05
ΛΟΝ
4
IRIAL
Mei
Sep
Nov
2019
BPD
Source: Bank Indonesia
JEW
BUMN
Mei
das
inc
Nov
Jan
Mar
Mei
2020
2021
BUSN KCBA
das
MON
2
Mar
เอา
2019
2020
HPDK
OHC
Nov
2021
Margin Keuntungan
2019
Spread (SBDK BI7DRR)
Deposito 1 bulan
Source: OJK
2020
Spread (SBDK - Sb depo 1 bln) ******* SBDK
BI 7 DRR
2021View entire presentation