Jakarta: Prime lending rates in the banking industry are still rigid in response to policy rate reductions by Bank Indonesia (BI), while more aggressive lowering of term deposit rate has increased spread.
From January 2020 until January 2021, BI lowered the BI 7-Day (Reverse) Repo Rate 125bps (yoy), contrasting the 78bps (yoy) decline recorded in prime lending rates, leading to a larger spread from 5.82% in January 2020 to 6.28% in January 2021.
On the other hand, the 1-month term deposit rate has come down by 189bps (yoy), with the spread against prime lending rate rising from 4.86% to 5.97%.
"Prime lending rates at state-owned banks are anticipated to decrease in line with the recent announcement to lower prime lending rates," BI Communication Department Head Erwin Haryono said in a press release on Monday.
In January 2021, prime lending rates at state-owned banks were higher (10.80%) than any other bank group, with reductions nevertheless predicted in March 2021 and other banks expected to follow suit.
The central bank publishes the ‘Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry’ as a follow-up action to the Board of Governors Meeting in February 2021.
The objective is to accelerate monetary and macroprudential policy transmission and expand the dissemination of information to corporate and individual consumers to enhance governance, market discipline and competition in the credit market.
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