TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Government retail bonds could squeeze small banks, say analysts
The government’s plan to issue more retail bonds this year could take a toll on smaller banks as they compete for customers to maintain liquidity.
Change Size
An employee monitors a bond auction on this file photo. (JP/File)
T
he government has issued four of the 10 retail bonds planned for this year to help finance its budget deficit, but analysts say that this could tighten the squeeze on small banks.
Government debt director Loto Srinaita Ginting of the Finance Ministry said the latest series – the SBR-006 retail savings bond – offered a minimum coupon rate of 7.95 percent and would be available until April 16 through 14 online and offline distribution partners.
The rate is lower than that of the previous SBR-005 series and the sharia-compliant retail savings sukuk ST-003, which offered minimum returns of 8.15 percent.
Despite the lower rate, Loto said the government remained upbeat that it could raise at least Rp 2 trillion (US$141.18 million) and up to Rp 5 trillion from the SBR-006 series. She also seemed unconcerned about the bond series missing its target.
“What we really want is to educate people to invest their money and increase the number of retail investors through the government retail bonds,” she said. More investors would also deepen Indonesia's financial market and protect it from negative, external sentiments.
Center of Reform on Economics (CORE) Indonesia research director Piter Abdullah, however, said the government’s aggressive stance on issuing retail bonds this year could cause the crowding out effect, making people more interested in channeling their money in the public sector instead of the private sector.
Piter said almost every bank in the country would experience this effect each time the government issued a domestic bond, but that small banks would be hardest hit. In particular, he cited the categories BUKU I (banks with a core capital of less than Rp 1 trillion) and BUKU II (banks with a core capital of Rp 1 trillion to Rp 5 trillion).
