Banks planning to raise interest rates on time deposits

Antara ,  Jakarta   |  Thu, 07/24/2008 7:30 PM  |  Business

Domestic banks are planning to raise their interest rates on time deposits following Central Bank's decision to increase its benchmark interest rate by 25 basis points to 8.75 percent recently, says a banker.

"The rise in interest rates on time deposits might prompt banks to increase their lending rates to adjust to the cost of funds," Kostaman Thayib, retail banking director of Bank Mega, said on Thursday.

Banks will be careful in raising the interest rates on deposits so as not to disrupt their credit expansion, he said.

"We will first look at market conditions to decide whether it is time to raise the interest rates on deposits," he said.

Domestic banks were now required to live up to their intermediary function to help boost national economic growth, he said.

Although the Indonesian economy was expected to slow down in the third quarter of 2008, banks would continue to channel credits to the public, he said.

Farid Rahman, president director of PT Bank Himpunan Saudara, said the bank was yet to raise its interest rate on deposits.

"We are still waiting for the large banks to raise their interest rates on deposits because they usually take the lead on the matter," he said.

Bank Saudara had so far set its interest rate on three-to-12-month rupiah and US dollar deposits at 8.75 percent and 2.5 percent respectively.

Meanwhile, state-owned Bank BRI said it planned to raise its interest rates on deposits early next week.

Bank Mandiri, the country's largest lender by assets, said it would raise its interest rate on deposits by 50 basis points.

Bank Mandiri's interest rate on one-to-12-month deposits in rupiah and US dollar was 5.5 percent and 2.75 percent respectively.

Farid Rahman said his bank would conduct a market survey before raising its interest rates on deposits. "We want our customers to continue putting their money in our bank," he said.(**)

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