Government Adds Rp100 Trillion Liquidity, OJK Values Can Lower Bank Interest Rates

Rupiah and US dollar (between)

JAKARTA - The government plans to disburse Rp100 trillion to the banking sector to strengthen liquidity while reducing interest costs.

Responding to this, the Financial Services Authority (OJK) assessed that this policy could accelerate the decline in interest rates felt by the wider community.

The Head of the OJK Banking Supervisory Executive, Dian Ediana Rae, stated that the Ministry of Finance's move gave banks room to reduce fund costs, including reducing the provision of special interest rates to large depositors.

"If I'm just welcome. The fiscal policy of the Minister of Finance (Purbaya Yudhi Sadewa) helps liquidity. And secondly, he (the injection of funds) will reduce interest costs. Now the special rate has significantly decreased," he told the media, quoted Thursday, March 26.

Dian explained that looser liquidity makes competition between banks in raising funds not as tight as before.

According to him, this condition is considered important to accelerate the transmission of the reference interest rate policy to the banking sector, so that the movement of bank interest rates can follow the BI Rate more quickly.

On the other hand, funds placed by the government also have the potential to be used by banks to buy State Securities (SBN).

According to Dian, this step can help finance the state while holding back the increase in bond yields.

However, Dian emphasized that the purchase of SBN was only temporary, and the main focus of the bank remained on the distribution of credit to the real sector.

He added that rather than idle funds, it is better to invest temporarily, before finally being transferred back to credit.

He also explained that the yield of SBN of around 6 percent is still lower than the interest rate of loans which can reach 9-10 percent, so when the demand for credit increases, banks will divert the funds back to financing.

"If demand is high, it can be disbursed. So if it's temporary, it's okay," he said.

Previously, Minister of Finance Purbaya Yudhi Sadewa stated that the addition of Rp100 trillion was carried out to maintain banking liquidity amid rising government bond yields.

"If the bond yield rises by 0.1 percent, I have noticed. If it rises by 0.4 percent, there must be a liquidity shortage in the bank. I checked, the bank is indeed short," he said in a media briefing, Wednesday, March 25.

He emphasized that the government was committed to continuing to maintain liquidity stability so as not to disrupt the financial sector.

"I add another Rp100 trillion into the economic system. We take liquidity seriously," he said.

According to him, with this addition, the total government funds placed in banks now reaches around Rp300 trillion.

He added that the funds were placed in state-owned banks as well as some regional banks with a flexible scheme and can be withdrawn at any time.

"The placement is flexible, it can be withdrawn at any time," he said.

Purbaya added that this policy will continue to be evaluated according to market dynamics, in the hope that it can reduce liquidity pressure while maintaining interest rate stability in the banking sector.