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Banks seek new funding sources amid savings crunch
An economist has suggested lenders issue bonds before interest rates are cut to maximize absorption, but these bonds should have shorter tenors to alleviate the expense of coupons in the next refinancing cycle.
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A teller hands rupiah banknotes to a customer on Oct. 30, 2023 at a Bank BSI branch in Jakarta. (Antara/Muhammad Adimaja)
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stark slowdown in savings has prompted banks to look for new funding sources to ensure they have enough liquid assets for issuing loans.
Data from the Financial Services Authority (OJK) show that growth of third-party funds (DPK), which comprise savings and time deposits, slowed from 9.01 percent in 2022 to 3.73 percent last year.
According to Bank Indonesia (BI), the slowdown is reflected in a downward trend in the amount of funds local lenders placed with the central bank, which fell from Rp 1.29 quadrillion (US$83.3 billion) in 2022 to Rp 1.05 quadrillion in 2023.
“Banks are also shifting their significant ownership of government bonds [SBNs] they accumulated during the pandemic for use in loan disbursement. This is evidenced by the declining share of SBNs to total assets, while credit [has grown],” BI Deputy Governor Juda Agung explained on Feb. 29 at the CNBC Indonesia Economic Outlook 2024 in Jakarta.
Juda’s presentation showed a drop in banks' securities ownership from 16.77 percent of total assets in 2022 to 16.53 percent in February 2024, while loan disbursement grew from 57.8 percent to 62.35 percent.
Local banks are also trying to secure more non-savings funds from external parties by borrowing from other banks or issuing bonds, according to the central bank’s assessment of banks’ 2024 business plans.
“This is why we believe that banks’ liquidity is sufficient to support their loan disbursement growth target of around 10 percent,” Juda said.
