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Jokowi’s fears at the end of office are proven, bankers cry out for liquidity

Jakarta, CNBC Indonesia – President Joko Widodo (Jokowi) has expressed his concern about the increasingly dry money circulation, even though Indonesia’s economic growth is still around 5%. He conveyed this towards the end of his term of office.

Jokowi believes that this problem arose because the Ministry of Finance (Kemenkeu) and BI issued too many instruments, namely Government Securities (SBN), Bank Indonesia Rupiah Securities (SRBI) and Bank Indonesia Foreign Currency Securities (SVBI).

“Don’t everyone buy too much, which I told BI and SBN earlier, even though it’s fine, it’s so that the real sector can look better than last year,” said Jokowi at the Bank Indonesia Annual Meeting (PTBI) at BI Head Office, Jakarta some time Then.

Then Jokowi’s fears were confirmed. This year, liquidity has become a major concern for bankers. In the midst of an era of high interest rates which are expected to last for a long time, competition for funds will be quite fierce.

President Director of PT Bank Rakyat Indonesia (Persero) Tbk Sunarso said that high interest rates had an impact on competition for banking liquidity. As is known, Bank Indonesia increased its benchmark interest rate by 25 basis points (bps) to 6.25% at the April 2024 Board of Governors Meeting.

“We respond to the increase in interest rates as a logical and rational decision. It remains a challenge that will definitely cause challenges in liquidity,” he said in a recent performance presentation for the first quarter of 2024.

Nevertheless, he ensured that BRI still had sufficient liquidity space for credit expansion. “For BRI which has LDR that much, yes, we are normal in the sense that we will definitely maintain LDR, but that doesn’t mean we are putting a brake on credit,” added Sunarso.

For information, as of March 2023, the credit to deposit ratio (BRI) was 83.78%. When compared with the same period last year, this figure decreased by 148 basis points (bps).

Separately, Finance Director of PT Bank Negara Indonesia (Persero) Tbk Novita Widya Anggraini said that liquidity was one of the two main focuses this year.

In maintaining liquidity, he said, BNI consistently prioritizes increasing low-cost funds (CASA) by optimizing digital services such as BNI Mobile Banking for retail customers and BNI Direct for corporate customers.

“With a strategy that focuses on strengthening liquidity, optimal asset allocation, strategic funding pricing, BNI believes that performance will remain stable in facing challenges while also being able to optimize opportunities to provide the best value for customers and stakeholders,” he said.

As of March 2024, BNI’s LDR rose 358 bps, or from 85.43% to 89.01%.

Meanwhile, PT Bank Tabungan Negara (Persero) Tbk revised its credit growth target this year. NIxon LP President Director Napitupulu said this was done because of tight liquidity in the market.

“So why are we targeting the same credit as last year, considering that the DPK may still have tight competition. But if we see that the funding position is good, we will push for an upward revision in credit. But looking at the situation today, we are not too bold in targeting more than 12%,” Nixon said earlier this year.

Apart from that, said Nixon, the rate of credit growth this year needs to be restrained to mitigate the risk of rising interest rates.

“Quarter I/2024 (credit growth) 14.85% (yoy), later we will reduce credit distribution to the level of 10% (yoy) in anticipation of expensive funds because interest rates are now more challenging. It’s like, with expensive raw material prices, then sales won’t don’t rush it,” he said.

As of March 2024, the LDR of the bank which focuses on home ownership loans (KPR) rose 244 bps to 96.23%. For information, Bank Indonesia provides LDR recommendations in the range of 84%-94%.

Search for Alternative Funding Sources

The Deposit Insurance Corporation (LPS) noted that the growth rate of non-DPK funds had increased again, after slowing down in the middle of last year. As of February 2024, this banking funding alternative grew 5.38% yoy.

The annual growth in non-TPF funds was mainly contributed by an increase in loans/financing received amounting to IDR 25.29 trillion and other bank liabilities amounting to IDR 11.88 trillion.

“This development is in line with the bank’s strategy of diversifying liquidity sources. Access to non-DPK funding sources is one source of fulfilling the funding gap amidst lower TPF growth compared to credit,” citing Financial Market Indicators for March 2024.

In the second month of this year, banking deposits grew 7.4% yoy, while credit rose 12.4% yoy.