Bank Indonesia (BI) has noted that the decline in the current banking interest rate has been slow even though the BI Rate has been cut since September 2024.
At that time, BI lowered the reference rate by 25 basis points (bps), from 6.25 percent to 6 percent.
Head of the BI Macroprudential Policy Department Solikin M Juhro said that BI routinely evaluates the transmission of interest rate cuts every quarter and normally, changes in the BI Rate are expected to affect bank credit interest rates within six months.
"The process in formulating policies, taking policies, and evaluating them is very regular, every month, every 3 months, every time we see it so that we see the reasonableness of whether 6 months down is what, well there are anomalies. We look for the factors," he said in a media briefing titled Assessment of the Effectiveness of Macroprudential Policies in Stimulating Credit Growth in 2025, Monday, December 22.
Solikin said that to accelerate the decline in bank interest rates, BI started on December 1, 2025, to implement the Macroprudential Liquidity Incentive Policy (KLM) which encourages the acceleration of credit distribution to priority sectors.
BI initially provided a KLM incentive of 5 percent, which was divided into four main sectors: agriculture, industry, and downstream 1.5 percent; services including creative economy 0.6 percent; housing 1.4 percent; and MSMEs, cooperatives, inclusion, and sustainable 1.5 percent.
In addition, banks that lower their interest rates faster will receive additional incentives of up to 0.5 percent, with a scheme of 0.4 percent for a decrease of 0.3 percent - 0.6 percent and 0.5 percent for a decrease above 0.6 percent.
He said that after the evaluation on December 16, 2025, this scheme was adjusted to be in line with the government's Asta Cita and the KLM incentive target for priority sectors to be 4.5 percent, while the incentive for banks that lower interest rates faster increases to a maximum of 1 percent.
Meanwhile, banks that are able to reduce interest rates by 0.3 percent to 0.6 percent receive an incentive of 0.9 percent KLM, and those that reduce more than 0.6 percent receive an incentive of 1 percent.
Solikin explained that this change is not absolute and BI will evaluate this new incentive to encourage the transmission of further reductions in the benchmark interest rate.
"Later we will still calibrate it. Later it will still be 1 percent or add 1.5 percent or (total KLM) add 6 percent. It is according to the needs," he said.
Previously, Bank Indonesia (BI) admitted that the demand for special rates or high interest rates from a number of depositors was one of the factors that caused the transmission of BI Rate policy to run slowly, even though the reference interest rate had been lowered by 150 basis points (bps) since September 2024.
Bank Indonesia (BI) Director of Macroprudential Policy Irman Robinson explained that the interest rate of the Third Party Fund (DPK) with the special rate scheme is still quite high, reaching 26.3 percent or around Rp. 2,549 trillion.
According to him, this condition makes the decline in interest rates in the banking sector not as fast as expected.
He explained that the one-month term deposit interest rate had dropped by 29 bps, from 4.81 percent at the beginning of 2025 to 4.52 percent in September 2025.
Meanwhile, the decline in credit interest rates was even slower, only about 15 bps, from 9.20 percent to 9.05 percent in the same period.
"Of course we have to encourage this, because if, for example, this special interest rate is still high, of course it will make the transmission of BI Rate policy, of course it will run slowly," he said in a Journalist Training, Friday, October 24.
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