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Exporters lured to place dollars in local banks
Large banks are persuading their large corporate customers, especially those involved in export activities, to deposit their foreign exchange earnings in local banks in a bid to help stabilize the rupiah, which has been under pressure on account of the global market rout
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arge banks are persuading their large corporate customers, especially those involved in export activities, to deposit their foreign exchange earnings in local banks in a bid to help stabilize the rupiah, which has been under pressure on account of the global market rout.
The persuasive approaches were taken following President Joko 'Jokowi' Widodo's call to the country's major banks last week to make their banking products more attractive to exporters so that they keep their dollars in local banks instead of depositing their export earnings in banks overseas.
Budi Gunadi Sadikin, president director at state-owned Bank Mandiri, said his bank did not have any plans yet to offer new banking products to lure the dollars of exporters, but had instead, used persuasive approaches to get them to place their export proceeds in domestic banks.
'As the rupiah continues to depreciate, we have suggested that our large customers with big forex funds from export proceeds place their funds in local banks and convert their dollars into the rupiah,' Budi said on Monday. By doing so, they would be able to benefit from the sharp fall in the currency and at the same time, would be able to help increase dollar supply in the local banking system, he added.
Budi said customers had responded positively as some of them had begun to put their dollars in his bank. 'We know from daily monitoring the large customers that have already placed their forex funds in Bank Mandiri and converted their dollars to rupiah,' he added.
Like Mandiri's boss, Bank Central Asia (BCA) president director Jahja Setiaatmadja also promised to lobby the bank's customers so that they would place and convert their dollars into the rupiah.
'We cannot force them to sell their dollars, but we can persuade and remind them to conduct forex transactions in the local forex market,' Jahja said.
Since 2011, Bank Indonesia (BI) has demanded that Indonesian exporters report and keep their dollar-based export revenues in local banks within 90 days of receiving payment to help support the Indonesian currency. But, the number of exporters complying with the rule has never reached 100 percent in past years because a large part of the country's export proceeds were still kept in offshore banks.
Central bank data announced by BI's executive director of statistics, Hendy Sulistiowati, during a press briefing showed that export proceeds coming into local banks had reached 93.5 percent of the country's total external trade in the second quarter of this year. The figure was equal to US$30.2 billion in the second quarter, an increase from $29.4 billion in the previous quarter.
Meanwhile, Mandiri's Budi said average daily transactions in the local forex market ' where companies trade their dollars through banks ' remained stagnant at $2 billion a day in the past ten years. The condition indicates that a large amount of Indonesia's forex funds are either not placed in the domestic banking system, or remained in dollars, when they are placed in local banks, according to Budi.
Xavier Jean, director for corporate ratings at Standard & Poor's, said two reasons exporters were reluctant to place their export proceeds in local banks were the country's sovereign risk and highly regulated forex transactions. Companies preferred keeping some cash overseas for easy access, Jean said.
