Government Measures to Mitigate Covid-19 Risk
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
Prime lending rate response to lower policy rate
(BI7DRR) still rigid.
Greater prime lending rate rigidity at state-owned
banks compared with other bank groups.
Prime lending rate rigidity found across all credit
segments, excluding micro loans.
Notwithstanding, the lending rate response to a lower
policy rate and loose liquidity conditions in the banking
industry remains rigid. This is reflected by significant
rigidity in the Prime Lending Rate (PLR) 2 in response to
the lower policy rate
The prime lending rate is used as the basis for
determining the interest rate to be charged by the
bank to the customer yet does not include the risk
premium. Therefore, the interest rate charged by the
bank to the borrower is not necessarily the same as
the prime lending rate.
PLR rigidity is a facet of nearly all credit segments,
affecting consumer loans, corporate loans and retail
loans. The rigid banking industry response, as reflected
by smaller increments of prime lending rate reductions,
has been observable in non-housing consumer loans
sessment period until December 2020 based on a Sin der
2 The pipe lending rate these rapid by
wit
(P2010. 37/POJK.03/2019, dated 19th Dec 2019, concerning Bank Report Transparency and
Publication.
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.
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.
BIZDRR Monthly Deposit
Rate SBDK - Prime
Lending Rate (SBDK)
Graph 1.
%
12
10
B
ɓ
4
2
0
Prime Lending Rate (SBDK)
%
Graph 2.
13
12
11
10
9
8
7
based of banking group
Regional Govt Banks (BPD)
State Owned Banks (BUMN)
Prime Lending Rate (SBDK)
2017
11.27
6.72
6.00
2020
+10,11
6.36
4,21
3,75
5.84
2018
2019
Spread (SBDK-BITDRR)
Spread (SBDK Sb depo 1 binl ... SBDK
Deposito 1 bulan ---B17 DRR
11.67
10.37
10.58
16.51
10.79
9,80
9.67
5,17
•
National Private Commercial
Banks (BUSN)
5
53.
•
Foreign Branch Banks (KCBA)
2017
2018
2019
2020
BPD
BUMN
BUSN
KCBA
Graph 3.
點
18
16
•
based of credit segment
Mortgage (KPR)
14
12
Non Mortgage (non KPR)
10
•
Corporation
Micro
Retail
2017
2018
Konsumsi KPR
2019
2020
4
Konsumsi Non KPR
Korporasi
Mikro
Ritel
********* * * *
B17 DRR (RHS)
11,52
10.42
10.27
2:38
36
G
13,75
3
10.85
9.70View entire presentation