JAKARTA: Large expansion in banking credit may push up interest rate as banks compete tightly in collecting fund, at a time when Bank Indonesia calls for lending rate cut.
The growth of banking credit will be around 22%, said PT Bank Central Asia Tbk President Director Jahja Setiaatmadja. In the meantime, higher growth will lead to competition in seeking liquidity.
“If growth is above 22% and there is little incoming capital from abroad, liquidity will be eroded,” he told Bisnis over the weekend.
Assuming such growth, he predicted that lending rate in the third quarter this year will rise when liquidity drops. If credit rises, business condition is getting better. However, people with idle fund will use them to invest in business before taking up bank loans.
“Then people will use their fund when business condition is good. It is a normal business cycle. So it’s not really true that credit will support business, but when business is good, people will seek for loan,” he explained.
As earlier reported, national banking liquidity is prone to volatility because the structure of fund is segmented and dominated by big depositors. Even when credit growth is moderate, competition in
getting third party fund is tight.
Competition in collecting fund makes interest rate stay high because banks want to attract customers to save their money. Such phenomenon happened when the intermediation ratio of banking industry reached the highest level in the past five years.
In 2006 when the fuel prices increased, deposit grew 14.1% while loan grew 13.9%. Similar thing happened after global crisis in 2009, when deposit grew 12.5% and loan grew slower, not more than 10%.
However Bank Indonesia begs to differ.
Bank Indonesia Deputy Governor Muliaman D. Hadad viewed that lending rate this year would decrease in line with the central bank’s policy to cut the benchmark rate.
”Interest rate this year may decline a bit, but we are working on pushing it lower,“ he affirmed.
Liquidity
Tight competition makes is harder for banks to get liquidity, said Destry Damayanti, head economist at PT Bank Mandiri Tbk. So, banks set interest rate higher than the benchmark set by Indonesian Deposit Insurance Agency (LPS).
“It’s particularly for those banks with aggressive credit growth. So, we don’t have to wait until the third quarter. Even now many banks offer interest rate above the LPS rate,” she said.
Consequently, interest rate in general will not decrease easily although state-controlled banks are forced to decrease theirs by the central bank, she added.
However, higher interest rate mostly applies to foreign exchange because this non-rupiah fund is very low, said Parwati Surjaudaja, who presides over PT Bank OCBC NISP Tbk. “Funds in rupiah is still
abundant when liquidity in US dollar is too little.”
The rupiah liquidity is indeed stable, unlike that of foreign exchange, said Ryan Kiryanto, an economist at PT Bank Negara Indonesia. Moreover, when foreign exchange capital rises, liquidity in
general will stay stable.
“So, lending rate will not high, unless there is a tendency of BI Rate of rising above 6%,” he added. (T04/msw)
Showing 0 - 0 of 0 comments