A Jakarta Composite Index (JCI) display reveals a declining trend at the Indonesia Stock Exchange (IDX). On Feb. 19, the IDX recorded net selling in bank stocks by foreign investors totaling nearly Rp 500 million a day after the State-Owned Enterprises Ministry announced it would set a deposit interest rate cap for state-owned companies. (thejakartapost.com/Wienda Parwitasari)

The Financial Service Authority (OJK) has prepared incentives for banks that follow the government's push to lower interest rates in the form of branch and product expansion simplification.

OJK chairman Muliaman Hadad said two aspects determined interest rates: cost of funds and operational costs. The regulatory body is discussing possible incentives and aims to complete a regulation on the matter in three or four weeks.

"As the cost of funds is getting lower, we must push more on efficiency. Currently, commercial and business loans have a high interest rate. We will introduce them [incentives] in stages," he said on Monday.

The OJK has refrained from issuing a regulation on a deposit interest rate cap, Muliaman said, despite the State-Owned Enterprises Ministry'€™s move to oblige state-owned lenders to lower their deposit interest rate for their state-owned companies clients.

The market reacted negatively to the policy on Friday, prompting a sell off of state-owned bank shares, led by Bank Negara Indonesia (BBNI). (ags)

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