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orty-two banks with assets of more than Rp 10 trillion (US$1.15 billion) announced their base lending rates on Thursday in order to comply with the central bank’s new rate transparency policy.

Bank Indonesia (BI) said the new regulation, which required banks to announce their base rates beginning March 31, was expected to promote competition that would in turn force them to lower their rates to be more competitive.

BI director of banking research and regulation Wimboh Santoso said Thursday that “forcing” the banks to lower their lending rates was not the main target of the new policy. “Our short-term target is banking efficiency. There is a potential that it could lower lending rates, but we are not eyeing the credit because there are various kinds of credit. But, there’s a potential for banks to maximize its efficiency because of the competition,” he said.

Bankers, however, were rather skeptical and are still in a “wait and see” mode as to whether or not the policy will be effective in increasing efficiency.

Indonesia lags behind member countries of ASEAN in terms of efficiency, with one of the highest net interest margins (NIM) — which measures the difference between interest received and paid to customers — of 6 percent versus 2 to 5 percent in neighboring countries.

“I think we can compete. If there is really a competition, I think we can lower our rates,” said Sofyan Basir, president director of Bank Rakyat Indonesia (BRI), the largest Indonesian lending bank.

Bank Negara Indonesia (BNI) president director Gatot M. Suwondo said “even without rate disclosure, banks have already been engaged in competition”, expressing doubts about the effectiveness of the policy.

Prime lending rates — more commonly referred to as the base lending rate — is the lending rate banks charge their prime customers. Prime customers usually have zero risks. Examples include the government.

Base lending rates are used as a benchmark for lending rates for other customers, which have varied risks “depending on their locations and profiles” Wimboh said, adding that the risks are normally weighed to customers and translated into the rates given to them.

As of Thursday, banks have published their base lending rates for corporate, retail and consumer (housing and non-housing) loans on their websites and announcement boards at their branches to comply with the central bank’s new banking transparency regulation.

According to the announcements summarized by BI, lending rates for corporate loans range from 7 to 13 percent, while retail loans range from 9 to 21.9 percent. Rates for housing loans range from 8.73 percent to 14.1 percent and the non-housing rate from 9.72 to 23.6 percent. The highest non-housing rate for consumer loans is given by Bank Danamon.

“Rates announcements in newspapers are expected to be done in the next seven days and two days afterwards banks need to submit the copy of the announcement to BI,” Wimboh said. For non-compliant banks, there will be administrative sanctions of Rp 5 to Rp 100 billion and/or two to 10 years in prison.