LPS Boss Explains Reasons For Not Raising Interest Rates For Foreign Currency Guarantee

Chairman of the Board of Commissioners of the Deposit Insurance Corporation (LPS) Purbaya Yudhi Sadewa. (Photo: LPS Doc)

JAKARTA - Chairman of the Board of Commissioners of the Deposit Insurance Corporation (LPS) Purbaya Yudhi Sadewa revealed that his party has no plans to increase the foreign exchange guarantee interest rate (TBP Valas).

"Because we are monitoring several factors that explain that we have not yet taken action, this is because the first is that the coverage of foreign currency guarantees is still high above 90 percent," he said in a statement to the media, Tuesday, August 2.

Currently, he said, the coverage of deposit insurance in the form of foreign currency by taking into account TBP LPS reaches 98.5 percent of total accounts.

"So almost everything has been covered, but most importantly we saw that in January 2022 the guarantee reached 98.22 percent and currently it reaches 98.50 percent, so there is an increase in the number of accounts meaning the funds are not going out, but this is actually increasing," " he explained.

Most importantly, he said, the LPS TBP policy is always in line with the Central Bank's interest policy.

"In other words, LPS will never interfere with monetary policy signals from the central bank," he added.

Another reason is that until now there has been no strong indication of the transfer of deposit funds in the form of foreign currency abroad.

"We always refer to data and the latest data shows that the total foreign exchange deposits in banks up to June still grew 4.5 percent year-on-year," he continued.

He added that a more detailed examination of the data showed that in January 2022 foreign currency deposits reached 21.42 billion dollars and in June 2022 it fell to 19,904 billion dollars.

Meanwhile, foreign exchange funds in current accounts in banks reached 36.48 billion dollars in January 2022, and in June 2022 rose to 37.55 billion dollars.

"So, there is a transfer of funds from foreign currency deposit deposits into foreign currency checking accounts. This illustrates an economy that is expanding, because the transfer of funds gives a very strong indication that the owner of these funds is getting ready to use them in real economic activities," explained ancient.

Another determining factor is not to provide incentives to retail foreign currency depositors whose money was previously in the form of rupiah, but was transferred to foreign currency or dollars.

"So if we increase it suddenly, this has the potential to trigger the diversion of rupiah funds into dollars, which we fear will actually disrupt the stability of the rupiah," he said.

He then emphasized that if the government wanted to issue a policy, it would certainly see what kind of impact it would have.

Purbaya also stated that LPS together with other KSSK members will always coordinate and continue to monitor all developments that occur both domestically and globally.