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BI predicts banks will increase credit interest rate
Bank Indonesia (BI) has predicted that banks will adjust their credit interest rates this year after they tended to restrain increases in their interest rates last year
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B
ank Indonesia (BI) has predicted that banks will adjust their credit interest rates this year after they tended to restrain increases in their interest rates last year.
'It is likely that in 2014, banks will increase their interest rates,' BI Governor Agus Martowardojo said in a seminar in Jakarta on Wednesday evening, as quoted by Antara news agency.
He said BI had increased its benchmark interest rate (BI rate) to 175 basis points in the second half of 2013. The banks later responded to the policy by increasing the deposit interest rate to 300 basis points while the credit interest rate was increased by only around 40 basis points.
In that year, Agus said, banks had chosen to 'sacrifice' their net interest margins (NIM) instead of increasing their credit interest rates to consumers. But this year, it was predicted that the banks would increase their credit interest rates.
'Therefore, business players must be ready. If they don't need the credit, then just return the money so that we will have stronger endurance,' said Agus.
The central bank governor added it was also predicted that there would be tighter competition to collect third party funds among banks in 2014, thus BI had asked banks to set their credit growth within 15 and 17 percent.
'If they want to maintain it at above 20 percent, it would be easy for big banks to seek deposits but small banks can weaken,' he said.
Agus acknowledged that BI's decision to increase the BI rate by 175 basis points last year was aimed at preventing Indonesia's current account deficit from soaring further and it was part of efforts to maintain the stability of the financial system in the country.
'Other countries, such as Argentina, South Africa, Turkey and Venezuela, have increased their benchmark interest rates to 400-500 basis points. Fortunately, we are ready to anticipate it, not like those countries, which had to increase their interest rates because they lost consumer trust,' said Agus. (ebf)
