Banking - Interest rate transmission continues to be pushed to stimulate credit distribution

Banking - Interest rate transmission continues to be pushed to stimulate credit distribution One of the efforts to encourage credit growth undertaken by Bank Indonesia (BI) is by lowering the BI rate benchmark interest rate over the past year. However, this effort needs to be accompanied by progressive transmission. BI recorded that the banking credit interest rate fell by 40 bps in January 2026, to 8.8% from 9.2% at the beginning of 2025. Compared to the BI rate decrease of 125 bps in the same period, the transmission of the credit interest rate is clearly considered slow. In order to encourage a more significant reduction in credit interest rates, BI has previously implemented the Macroprudential Liquidity Incentive Policy (KLM) thru the interest channel. The amount of the incentive is determined based on the bank's ability to adjust new credit interest rates to the BI rate. According to BI Deputy Governor Destry Damayanti, this KLM interest channel has successfully pushed the transmission of credit interest rates. Although existing credit interest rates have only decreased by 40 bps, Destry said new credit interest rates have decreased more significantly by 75 bps. This shows that the transmission of interest rate policy has already started. This is in line with the realization of the KLM interest channel incentive, which reached IDR69.6 tn in less than two months. Moreover, Destry said that in principle, the utilization of this incentive is still wide open. (Source : Kontan)