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Sluggish rise in bank savings may slow loan growth, analysts warn
Experts warn that the ongoing "liquidity battle" between banks and government could be expected to intensify next year.
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A Bank Mandiri employee holds a bundle of rupiah banknotes on June 23, 2022 at a Jakarta branch. (Antara/Muhammad Adimaja)
Growth of third-party funds in the banking sector has slowed further, continuing a trend that began early this year.
The country’s lenders booked in October a year-on-year (yoy) increase of only 3.43 percent in customer savings, current account balances and time deposits, down from 6.54 percent in the preceding month.
The Financial Services Authority (OJK) and Bank Indonesia (BI) maintain that liquidity in the banking sector remains abundant, but analysts warn the issue could result in slower loan growth next year due to a “liquidity battle” between banks and nonbanks, including the government.
BI data shows that third-party funds in current accounts grew only 1.8 percent yoy in October, a marked slowdown from the 11 percent annual rate recorded in September.
Meanwhile, money in savings accounts and time deposits increased 2.6 percent yoy and 6.9 percent yoy, respectively.
The central bank has undertaken efforts to shore up liquidity.
“Adequate liquidity in banks is also supported by the implementation of the Macroprudential Liquidity Policy Incentives (KLM) effective from Oct. 1, 2023, providing additional liquidity to the tune of Rp 138 trillion [US$8.9 billion] as of November 2023,” BI Governor Perry Warjiyo told a press briefing on Nov. 23.
