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Banks cut lending rates to accelerate real sector
Indonesia’s top banks Bank Mandiri and Bank BNI have started cutting their lending rates in response to the central bank’s rate cut
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Indonesia’s top banks Bank Mandiri and Bank BNI have started cutting their lending rates in response to the central bank’s rate cut.
As of the end of November last year, Mandiri and BNI together channeled over Rp 270 trillion in loans, making up just over 20 percent of total credits extended by the banking sector.
In a statement sent late Monday, Mandiri corporate secretary Sukoriyanto Saputro said the bank would cut lending rates up to 0.5 percent, starting Tuesday, to help stimulate the real sector.
“Mandiri has reviewed lending rates thoroughly and decided to cut the rates of rupiah-based loans in all segments up to 50 basis points,” he said.
Meanwhile, BNI made a more aggresive cut. President director Gatot M. Suwondo said BNI would cut its lending rates, also starting Tuesday, between 0.5 percent and 1 percent for all segments.
BNI’s lending rates currently range between 13 and 17 percent.
“What is most important is to accelerate real sector growth. The lending rates will always be monitored by considering the risk factor,” Gatot said.
Besides cutting lending rates, BNI also cut the deposit rates by 0.5 percent on average.
The central bank cut its interest rate by 50 basis points to 8.75 percent earlier this month.
The economy is relying heavily on the banks to keep channeling loans to help it grow by between 4.5 and 5.5 percent this year, slower than the estimated 6.2 percent last year.
Danareksa Research Institute chief researcher Purbaya Yudhi Sadewa said with BI likely to cut its rate further to between 7.5 and 8 percent, banks would have no choice but to follow the trend.
If the BI rate hovers at 8 percent, banks “may cut their lending rates to slightly below 13 percent, the lowest in history, just like what happened in 2008 when the BI rate stood at 8 percent”, he said.
Amid the protracted worldwide credit crisis, the nation’s banking sector is in for probably the toughest year since the 1997-1998 crisis.
However lending is still likely to grow at 18 to 20 percent, but slower than last year’s 30 percent.
Other indicators used to gauge a bank’s financial health such as capital adequacy ratio and non performing loans are also set to indicate weaker positions.
