Indonesia’s Finance Minister Purbaya Yudhi Sadewa has announced plans to cap deposit interest rates for small and medium-sized financial institutions (SMVs) at 80% of the Bank Indonesia (BI) policy rate.
The move is designed to compress banks' funding costs, thereby reducing lending rates and stimulating broader economic activity.
By limiting the yield competition among smaller lenders, the government seeks to prevent a race to the top in deposit rates that has historically pressured bank margins and kept credit expensive for borrowers.
The proposal targets the segment of the banking sector where deposit rate competition is most intense.
SMVs often offer higher yields to attract liquidity, which can distort the transmission of monetary policy.
By imposing a ceiling tied to the central bank's benchmark rate, the finance ministry aims to align funding costs more closely with the official policy stance.