Interest Rates on Loans Likely to Fall Again

Bank lending interest rates are poised to fall further following the central bank's first benchmark interest rate cut in ten months. The Bank Indonesia (BI) Board of Governors' meeting on August 21-22, 2017, decided to cut the BI 7-day Reserve Repo Rate by 25 basis points (bps) to 4.5 percent from 4.75 percent.

Based on Financial Services Authority banking statistics, the average bank lending interest rate for working capital at the end of June 2017 was 11.14 percent, down 70 bps from June 2016. The consumer credit interest rate stood at 13.21 percent, down 63 bps from 13.83 percent. Similarly, the investment credit interest rate was at 10.98 percent, down 51 bps from 11.49 percent.

Bank lending grew by 7.75 percent year-on-year (YoY) to Rp 4,491.19 trillion by the end of June 2017 compared to June 2016. Meanwhile, Third Party Funds (DPK) grew by 10.3 percent to Rp 5,045.99 trillion.