Key facts
- Bank Indonesia aims to shift commercial bank liquidity from central bank securities to lending.
- A new policy effective September 1 reduces required reserves for banks holding less than 19% in government bonds and SRBI.
- The central bank seeks to use SRBI as a liquidity management tool, not an investment instrument.
- Outstanding SRBI in the market has been reduced to around 1.05 trillion rupiah.
- The Financial System Stability Board met to discuss liquidity issues.
Bank Indonesia is implementing a new policy to steer commercial banks away from investing excess liquidity in central bank securities and towards increasing lending. Acting Governor Destry Damayanti stated that the central bank wants its SRBI (Surat Berharga Negara Indonesia) to function as a liquidity management tool rather than an investment instrument for banks. This initiative is part of broader efforts to manage liquidity and attract foreign capital.
The policy, effective September 1, involves a 200 basis point reduction in required reserve levels for banks that hold less than 19% of their funds in government bonds and SRBI. Bank Indonesia has already reduced the outstanding amount of SRBI in the market to approximately 1,050 trillion rupiah ($58.40 billion) from 1,097 trillion rupiah in mid-July.
The announcement was made during a press conference following a meeting of Indonesia's Financial System Stability Board, which comprises top officials from the finance ministry, central bank, Financial Services Authority, and deposit insurer. This meeting was the first since the unexpected resignation of BI Governor Perry Warjiyo, which had previously caused investor anxiety.
Finance Minister Purbaya Yudhi Sadewa confirmed that liquidity issues were discussed and resolved during the board meeting. The Financial Services Authority chief, Friderica Widyasari Dewi, noted that the banking industry has adequate liquidity but emphasized the need for regulators to coordinate any withdrawal of government funds from commercial banks to prevent market disruption.
Damayanti reiterated Bank Indonesia's commitment to a policy mix aimed at maintaining rupiah exchange rate stability, controlling inflation within its target range, and supporting economic growth.