Banking - Bank Indonesia's rate cut prompts deposit interest reductions

Banking - Bank Indonesia's rate cut prompts deposit interest reductions Following Bank Indonesia's recent decision to lower its benchmark interest rate, several Indonesian banks have begun reducing their deposit interest rates. While rates for shorter tenors (1, 3, 6, and 12 months) increased slightly in August compared to July, the rate for 24-month deposits declined. One of the first major banks to adjust its rates is PT Bank Central Asia (BCA). Effective October 1, 2024, BCA lowered its 3-month deposit interest rate by 25 basis points to 3.00%. The bank cited factors such as liquidity conditions, market trends, and the Bank Indonesia Rate as influencing this decision. (Source : Kontan) Comment : Lower funding costs are expected to positively impact banks' overall interest expenses. With the potential for further interest rate cuts in the coming quarters, banks should see improved margins and earnings growth, especially as loan growth remains strong. This positive outlook supports a "Overweight" rating for the banking sector.