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Jakarta Post

BCA raises deposit rate, holds loan rate

Bank Indonesia’s (BI) recent decision to raise its reference rate for the second time by 25 basis points (bps) has pushed Indonesia’s biggest private lender Bank Central Asia (BCA) to raise its deposit rate by the same amount, while maintaining its lending rate

Anton Hermansyah (The Jakarta Post)
Jakarta
Mon, June 4, 2018

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BCA raises deposit rate, holds loan rate

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ank Indonesia’s (BI) recent decision to raise its reference rate for the second time by 25 basis points (bps) has pushed Indonesia’s biggest private lender Bank Central Asia (BCA) to raise its deposit rate by the same amount, while maintaining its lending rate.

In an official statement, the bank announced that the annualized deposit rate for rupiah-denominated savings was between 4.5 to 5 percent, depending on the tenor — which varied between one to 12 months — and the deposit amount.

“We have increased the deposit rate but only by 25 bps,” BCA individual banking director Suwignyo Budiman said in Jakarta recently.

He added that the deposit rate was raised to catch up with increasing rates at both the domestic and global levels. Previously, the bank also hiked its deposit rate in February.

BI’s move to raise its rate was seen as an attempt to ensure stability against volatility that is expected to increase on the back of the United States Federal Reserve’s planned interest rate hike.

Despite holding its rate in April and May, there were strong signs that the Fed would again raise its reference rate during a meeting in mid June.

The Fed rate hike in March had pushed BI to raise its seven-day repo rate by 25 bps on May 17. On May 30, newly inaugurated BI Governor Perry Warjiyo held an additional meeting and raised again its reference rate by 25 bps.

The additional meeting was held because the Fed’s June 13 meeting coincides with the long Idul Fitri holiday. According to the central bank’s schedule, the June meeting would be held from June 27 to 28, a week later than the usual monthly meeting.

Although BCA had increased its deposit rate, it has yet to raise its lending rate. Suwignyo Budiman reasoned that the bank was still monitoring the market’s supply and demand.

“I guess for now, we will leave the lending rate steady,” he said.

BCA commercial and small and medium enterprises (SME) director Henry Koenaifi said the lending rate hike must be calculated precisely because it could disrupt the bank’s relationship with customers. A decision to increase the lending rate would depend on the banks’ cost of funds.

“The main factor is cost of funds and another is customer expectations. If we increase the rate but customers expect us to hold the rate, our relationship will turn sour,” he said.

In April, the bank recorded a 14 percent year-on-year (yoy) loan growth for the commercial and SMEs segment. The bank has set lending rates at between 10.5 to 12 percent for commercial customers while SME customers are charged with a rate that is 25 bps higher.

At BCA, those categorized as SME customers are customers with Rp 1 billion to Rp 15 billion in annual income. Those who earn more than Rp 15 billion are categorized as commercial customers.

“Actually our rate is negotiable. If a customer has good track record and is a relatively low risk, we can give a lower-than-average rate,” Henry said.

He added that the demand for loans in the segment depended on macroeconomic growth and that corporations would not seek expansion if the economy did not book high growth.

“In 2015 and 2016, many people thought the Indonesian economy could grow above 6 percent. But now, they realize the economy only grew at 5 percent so demand for loans did not grow much,” he said.

Henry added that the bank’s SME and commercial customers came from various segments, such as garments, textiles, packaging and plastic utensil manufacturing.

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