Overheat Indonesian Banking, Credit Interest Is Still Mahal

Illustration (Photo: Doc. Antara)

Minister of Finance (Menkeu) Sri Mulyani said that banking conditions in Indonesia still need a number of improvements in terms of business processes.

According to the Minister of Finance, one of the things that is now being pushed for improvement is in terms of the imposition of interest rates by business actors on customers.

"We see that banks are currently experiencing a relatively high overheat from the business side," he said during a working meeting with Commission XI of the DPR at the Senayan Parliament Complex, Jakarta, Thursday, November 10.

The Minister of Finance explained that this indication is based on the net interest margin (NIM), the majority of which are still at large levels.

"This shows that the efficiency of intermediation is lower and has an impact on the high interest rate of banks," he said.

The Minister of Finance added that the performance of national banking is still far behind neighboring countries in ASEAN, such as Vietnam, Malaysia, and Thailand. Only the Philippines is a country in the region that has almost the same net interest margin characteristics as Indonesia.

The current condition is becoming increasingly complicated with the trend of Bank Indonesia's benchmark interest rate which has continued to increase in the last three months reaching 125 basis points (bps) to 4.25 percent.

Therefore, the government and the DPR are currently discussing the Draft Law on the Development and Strengthening of the Financial Sector (RUU P2SK) as an effort to reform in the financial sector so that Indonesia's financial system is built better in a regulatory manner.

The regulation will also become a big umbrella in regulating digital financial schemes that continue to emerge, such as fintech, crypto, and covering the Islamic economy, banking, and insurance.