Bank BUKU 1 Deposit Interest Rates Above 7%

Bank Indonesia (BI) has been raising its benchmark interest rate, the BI 7-Day Reserve Repo Rate, since May 2018. This policy has been followed by an increase in deposit interest rates in banks. The interest rate on time deposits (deposits) at general banks with a 1-month tenor in September 2018 was at 6.49%, up 69 basis points (bps) from 5.59% at the end of May. This increase was the largest compared to deposits with other tenors.

The central bank's interest rate hike has tightened banking liquidity, so banks have started to raise their deposit interest rates to keep people interested in placing their funds in their banks. Smaller banks or Bank Umum Kelompok Usaha (BUKU) 1 are the ones most affected by the tight liquidity. This is evident from deposit interest rates for all tenors being above 7% and above the interest rates of general banks, as shown in the graph below. However, the deposit insurance rate of the Deposit Insurance Corporation (LPS) is only 6.75%. This means that deposits with interest rates above 6.75% are not guaranteed by the LPS.

Meanwhile, the deposit interest rates of BUKU 4 banks, which are large banks, are below the interest rates of general banks. For example, the 1-month tenor deposit interest rate of a BUKU 4 bank is 5.97%, lower than the interest rate of general banks with the same tenor, which is 6.28%.