OJK Sets Ceiling Interest Rates for Banks

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  • Otoritas Jasa Keuangan (OJK)

    Otoritas Jasa Keuangan (OJK)

    TEMPO.CO, Jakarta – The Financial Service Authority (OJK) has set the allowed highest interest rate for third-party funds (DPK) to be enforced starting October 2014. OJK commissioner for banking supervision Nelson Tampubolon said in a press release on Tuesday, September 30, 2014, that it was aimed at preventing negative impacts of interest rate competition. 

    According to Nelson, the ceiling rate is in accordance with the condition where banks are offering interest rates on deposits above the rate set by the Deposit Insurance Corporation (LPS). 

    Based on the Indonesian Banking Statistics (SPI), the DPK interest rate is increasing by 70 basis points from 7.97 percent in January to 8.67 percent this year. 

    “Banks under BUKU III and IV categories generally offer depositors with interest rate of 11 percent,” Nelson said. 

    As a comparison, Nelson said, the average interest rates in Malaysia, Singapore and Thailand hovered from 2-4 percent with loan interest rates of 3-9 percent. In Indonesia, the loan interest rates are somewhere between 11.25-13.30 percent for corporations and 16-23 percent for micro enterprises.

    Therefore, the OJK has set the ceiling interest rate of 7.75 percent for the DPK with a total amount of Rp2 billion (US$166,667). For banks under BUKU IV category, the maximum interest rate is pegged at 9.5 percent, which is 200 basis points higher than the BI rate. Meanwhile, the maximum interest rate for banks under BUKU III category is set at 9.75 percent, or 225 basis points higher than the BI rate.

    To ensure compliance with the maximum interest rate, the OJK will conduct monitoring and supervision actions on banks under BUKU I and BUKU II categories and encourage them to lower their DPK interest rates.