Bank Lending Interest Rate Cuts Lag Behind BI's Policy Rate

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Viva Budy Kusnandar 11/11/2019 13:04 WIB

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Throughout July-September, the BI 7-day rate has decreased by 75 basis points to 5.25%.

Bank Indonesia 7-Day Rate Interest Rate, General Bank Credit Interest Rate (Jan-Oct 2019)

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Bank Lending Interest Rate Cuts Lag Behind BI's Policy Rate

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Bank Indonesia 7-Day Rate Interest Rate, General Bank Credit Interest Rate (Jan-Oct 2019)

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Bank Indonesia (BI) has cut its benchmark BI 7-day Reserve Repo Rate by 25 basis points (bps) four times in a row, totaling 100 bps over four months, bringing it down to 5%. This interest rate reduction aims to stimulate domestic economic growth amid a global economic slowdown caused by the US-China trade war.

However, this aggressive reduction in BI's benchmark interest rate has not been followed by a corresponding decrease in bank lending rates. Between July and September, the BI 7-day rate fell by 75 bps to 5.25%. Meanwhile, the average bank lending rate for investment credit only decreased by 13 bps to 10.11%. Similarly, the lending rate for working capital fell by only 10 bps to 10.29%, and the consumer credit interest rate decreased by a mere 4 bps to 11.53%.

The reluctance of banks to lower their interest rates has discouraged some businesses from applying for loans amidst the sluggish domestic economy.

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."

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Bank Lending Interest Rate Cuts Lag Behind BI's Policy Rate

Bank Lending Interest Rate Cuts Lag Behind BI's Policy Rate

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Bank Lending Interest Rate Cuts Lag Behind BI's Policy Rate

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