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View all search resultsGovt to deposit $12b in commercial banks to ‘jump-start’ lending
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High-rise buildings are seen in the Sudirman Central Business District in South Jakarta on March 14, 2021. (AFP/Adek Berry)
T
he government has announced plans to shift some state deposits from the central bank to commercial banks to allow for more loan disbursements and thereby invigorate private sector activity in a bid to achieve 6 to 7 percent gross domestic product growth.
Finance Minister Purbaya Yudhi Sadewa revealed on Wednesday that the government had around Rp 425 trillion (US$25.8 billion) deposited in Bank Indonesia (BI), of which Rp 200 trillion would be deposited in government accounts at commercial banks, “so it becomes banking liquidity”.
“[It’s] just depositing money, but the banks can’t simply let the money sit idle, as there will be a cost to that. They will be forced to find a higher return, and loan growth will emerge from that,” the newly installed minister told reporters after a hearing with House of Representatives Commission XI, which oversees financial affairs.
“So, I’m jump-starting the market mechanism by giving them a weapon that will force the banks to think harder to get high returns,” he added.
Later in the day, the minister explained that “it will be up to the banks what the money is for” but the ministry will create a regulation that prohibits the banks from using the money to buy government bonds, which the ministry’s economy and fiscal strategy director general, Febrio Nathan Kacaribu, said on Wednesday “would be counterproductive”.
The state’s deposits in BI are sourced from excess cash budget (SiLPA) and cash surplus (SAL), which refers to unspent annual budget funds.
The Finance Ministry could not say yet whether the funds would be deposited only in state-owned banks or also with private-sector lenders, noting that the plan was still being discussed.
