BI Will Adjust the KLM Incentive Scheme After BI Rate Rises

Bank Indonesia (Photo: VOI doc)

MAKASSAR - Bank Indonesia (BI) noted that banks continued the trend of decreasing credit and deposit interest rates as an impact of the transmission of the BI Rate reduction of 150 basis points since September 2024 to be at the level of 4.75 percent.

The Director of the BI Macroprudential Policy Department, Dhaha P Kuantan, explained that the credit interest rate still showed a decrease, namely in March 2026, the credit interest rate was recorded at 9.03 percent and fell to 8.95 percent in April 2026.

According to him, this condition shows that the transmission process of the BI Rate policy is still ongoing, even though there is a lag effect from the previous adjustment.

"The interest rate on credit, if we look at it from March, the amount is around 9.03 percent, April was at 8.95 percent, so it continues the trend of decline in accordance with the transmission of the BI Rate. Indeed, the one who used to fall, continued to stay so there was a lag effect so this is still continuing," he said in a Journalist Training, Friday, May 22.

However, he added that BI in May 2026 decided to raise the BI Rate by 50 basis points to 5.25 percent and this policy made banks need to make adjustments to credit interest rates again.

Dhaha explained that previously the Macroprudential Liquidity Policy (KLM) incentive was designed to accelerate the decline in credit interest rates through incentives to banks that are actively lowering loan interest rates.

"So the hope is that in the past, KLM, we designed how it could accelerate the transmission of the decline, so there is elasticity to the BI Rate, how much the decline is to the BI Rate, how big it is, we give incentives," he said.

In the future, he said, BI will change the mechanism for providing KLM incentives by using the calculation of the spread between the BI Rate and the banking credit interest rate.

According to him, through this scheme, banks that do not increase credit interest excessively when the BI Rate rises can still receive incentives.

"In the future, we will adjust what the mechanism is called so that it is calculated based on the spread between the BI Rate and the credit interest rate, so when the BI Rate goes up, but the banks do not significantly increase the credit interest rate or are not manageable, very high, of course, the banks will get the incentive," he explained.

He emphasized that this policy is expected to encourage banks to keep credit interest rate increases under control so that credit distribution and economic growth remain conducive.

"So the hope is that although the BI Rate interest rate rises, the increase in the interest rate on credit is more manageable so that the transmission to credit growth can still run so it is related to how the development of credit interest rates and our policy design to remain conducive to encouraging the credit growth market," he concluded.