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AKARTA: Bank Indonesia (BI) projects that loose monetary and macro-prudential policy will stimulate credit growth in June, leading to an 8.9 percent year-on-year (yoy) growth figure, a slight increase from the 8.3 percent recorded in the previous month.

BI's monetary policy executive director Juda Agung said the central bank had decided to gradually cut its benchmark interest rate by 100 basis points (bps) since the beginning of 2016. As of June 21, the deposit rate fell by 80 bps while the lending rate fell by 40 bps.

"The decline in the lending rate is 45 percent, but I think it will be further adjusted in the following months. The BI rate cut immediately affects the deposit rate, followed by the lending rate. We expect bank loans to accelerate by 8.9 percent in June," he said in Jakarta on Thursday.

He went on to say the full effect to lending rates would be seen at the end of the year, because banks still had to consider the cost of funds, overhead costs and profit margins in calculating a feasible lending rate cut.

However, the slow transmission in the lending rate cut has led to limited credit growth amid the moderate gains that banks enjoyed in May 2016. During that month, bank loans grew 8.3 percent, an insignificant increase compared to the growth recorded in April, at 8 percent. On the other hand, bank deposits climbed 6.5 percent, up from 6.2 percent a month earlier. — JP