Lowering Interest Rates From 1.5 To 3.25 Percent, BRI Wants Public Purchasing Power To Increase

President Director of BRI Sunarso. (Photo: Doc. Antara)

JAKARTA - PT Bank Rakyat Indonesia Tbk (BRI) said that people's purchasing power and consumption were the keys to driving credit growth during the COVID-19 pandemic.

"BRI conducted an analysis and it turned out that the most elastic to increase credit growth were household consumption and people's purchasing power", said BRI President Director Sunarso in an online seminar in Jakarta, quoted from Antara, Thursday, March 4.

According to Sunarso, the total public funds placed in the banking sector amounted to IDR 6,665 trillion and bank credit that could be disbursed was IDR 5,548 trillion and a Loan to Deposit Ratio (LDR) of 83 percent.

But the problem, he continued, is how to grow this credit? Stakeholders and regulators have made various efforts, including Bank Indonesia (BI), which has continuously lowered the BI 7-day Reverse Repo Rate, where the latter had already become 3.5 percent. Then the cost of funds also decreased, where last week BRI announced cuts in interest rates of 150-325 bps.

Another question is whether it is true, he said, that the lowering of interest rates is expected to boost national credit growth. BRI has data that before 2015 the KUR (People's Business Credit) interest rate was 22 percent and at that time the national credit growth was always double-digit.

Then after 2015, the KUR interest rate was lowered to 15 percent and even subsidized so that only 7 percent paid by the community. However, the data shows that this did not make credit growth double digits, and only once reached double digits in 2018.

"Then it may be concluded that a lowering interest rate does not automatically boost credit growth or that a reduction in interest rates is not the only factor that can boost credit growth", said Sunarso.

He continued, policies that must be encouraged to grow credit to grow Indonesia's GDP include lowering interest rates, but also boosting people's purchasing power and spending capacity. So when a policy is needed to create and continue infrastructure projects that provide jobs to the public.

Sunarso said that what needs to be encouraged is how to provide jobs to the community, encourage increased income, distribution of stimulus, 0 percent PPnBM incentives, increase in loan to value so that the public is interested in taking credit, and reviewing MSME bad credit bills.