JAKARTA: Bank Indonesia, Indonesian central bank, viewed the average lending rate could be pushed down to 8% within less 4 years, if the inflation rate stays below 4%.
Deputy Governor of Bank Indonesia for Bank Supervision and Monetary Management Halim Alamsyah revealed inflation rate in 2012 is likely to be below 4% with, assuming that inflation in December isn’t more than 0.8%.
“If the average monthly inflation rate this year stays at 0.5%-0.6%, thus annual inflation rate will stand below 4% or at 3.8%-3.9% probably,” he explained after attending the inauguration of Deputy Governor of Bank Indonesia Muliaman D. Hadad and Ronald Waas, yesterday.
Even though the decline in interest rate to 8% becomes a medium-term plan, he is optimistic for it to be realized before 2015 given the better efficiency and risk management.
Therefore, Bank Indonesia is taking a more directive measure to urge banks to bring down price as well as publish base lending rate.
At the sametime, monetary and banking authorities also cut BI Rate to 6%, the lowest level ever. In addition, the central bank also asks banks to include efficiency and interest rate-declining program into their business plan of 2012.
Chairman of Indonesian Banks Association Sigit Pramono stated banks have been selectively distributing 8%-9% credit interest to eligible corporate customers.
High interest is not only because of the banking industry, but also related to the government and real sector. Thus he asked all related officials to cooperate.
Loan interest is high because there are government policies that cause risk premiums to raise, like policies on taxation and employment sectors.
President Director of PT Bank Mandiri Tbk Zulkifli Zaini stated credit interest is highly depending on bank operational cost, risk premium, profit and profit margin. Low interest, he believed, can be given to borrowers with low credit risk.
Indonesian Chamber of Commerce & Industry previously hoped banks' interest rates can be lowered to 8% in order to be more affordable for employers, especially small and medium micro enterprises. Based on central bank’s data, current average bank lending rates is at 12%.
In the meantime, the establishment of Financial Services Authority (FSA) will be oeprating effectively starting early 2014, thus forcing the change in central bank's design and structure.
Central bank Governor Darmin Nasution said that the bank is ready for transition period, including redesigning the central bank's structure.
According to FSA Law which was just established, the institution is authorized for regulating and monitoring the financial institutions, including banks. The authority was used to be central bank's obligation.
The authority takeover from regulator of financial institutions to FSA will done gradually with transition period until end of 2013.
At first transition period, Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK), which now serves as regulator and supervisor of nonbank financial instituion will merge into FSA with deadline at end of 2012.
In early 2013 the transition of authorities from cental bank will be done by moving central bank employees to FSA, and will be permanently moved in the end of 2013.
Law of Bank Indonesia will be amended next year, said Darmin. In the amended law, there will be some adjustments in central bank's functions and authorities. (T01/T05/NOM)