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Reference rate cut will not ‘greatly affect bank rates’
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A bank employee counts money in Jakarta in September. (Antara Photo/Muhammad Adimaja)
B
ank Indonesia’s (BI) decision to further cut its 7-day repo rate in October will not greatly affect banks’ interest rates due to a mismatch in time periods, an economist has said.
Deposit Insurance Corporation (LPS) commissioner Destry Damayanti, who is also a senior economist, said the scope of the 7-day repo rate was too short compared to banks’ needs.
“The reference rate affected the overnight interbank rate but banks are looking for one- to three-month debt instruments to increase their liquidity right now,” she said after an Indonesian Economists Association meeting in Jakarta on Friday.
She said instead of being affected by BI’s reference rate, banks’ interest rates would rather be affected by debt instruments’ yield.
Bank Mandiri president director Kartika “Tiko” Wirjoatmodjo said banks had to meet their planned capital adequacy ratio by the end of the year. As third party funds decreased in September, they must secure money by issuing debt instruments.
“Some banks need at least three-month instruments to increase their capital base, at least until they end this year,” Tiko said.
Currently, three-month to one-year debt instruments have 7 to 7.6 percent interest rates while the BI 7-day repo rate is at 4.75 percent. (evi)
