span style="line-height:1.6em">Bank Indonesia’s (BI) move to switch from the BI Rate to the BI 7-day Reverse Repo Rate as its monetary policy reference could help prevent commercial banks from parking excessive liquidity at the central bank.
HSBC Indonesia managing director Ali Setiawan said BI was going back to the old times, when the reference rate was more transactional, while at the same time driving bankers to opt for the interbank market instead of BI certificates, which essentially ended up being 'idle money', to save their excessive liquidity.
"There is an interbank money market with high transactions of Rp 90 trillion to Rp 100 trillion [US$6.8 billion-$7.6 billion] per day. The banks only access 10 percent of that number, and the remaining 90 percent are placed at BI," he told thejakartapost.com in Jakarta on Thursday.
While BI facilities are more complete, with many different instruments that bankers may use to save their excessive liquidity for any duration, the market should not depend on the central bank, Ali said.
Right now, according to him, the market situation was very supportive for private banks to put their excessive cash into the money market.
"The credit growth is sluggish, as companies are reluctant to take more loans, BI cuts the reserve requirement, allowing banks to withdraw their savings from BI, and a lot of foreign funds are starting to come to Indonesia again," he said. (ags)
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