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UPDATE 1-Indonesia central bank plans new rules to improve loans, liquidity
November 28, 2017 / 2:44 PM / 20 days ago

UPDATE 1-Indonesia central bank plans new rules to improve loans, liquidity

(Adds governor comment, background)

JAKARTA, Nov 28 (Reuters) - Indonesia’s central bank is planning to issue new rules as it seeks to improve credit distributions by banks and improve their liquidity management, Governor Agus Martowardojo said during its annual bankers dinner on Tuesday.

The changes are aimed at boosting Indonesia’s growth to well above 5 percent through the banking sector, where lending growth has remained sluggish this year despite a number of easings.

Bank Indonesia (BI) plans to expand the implementation of reserve requirement for Islamic banks, as well as reserve requirements for foreign currency denominated deposits, Martowardojo said.

It will be expanded from currently conventional banks and rupiah denominated deposits.

The central bank aims to “adjust the ratio and extend the fulfillment period” of the reserve requirements, Martowardojo added.

BI, earlier this year, as relaxed its reserve requirement rules.

Current rules says conventional banks must keep a minimum 5 percent of their total rupiah deposits at BI everyday and maintain at least a 6.5 percent average of total deposits in the period of two weeks. Banks would get an interest of 2.5 percent from BI.

Previously, banks have to maintain 6.5 percent reserves daily.

Meanwhile, it also plans to implement a new measure called “macroprudential intermediation ratio” to gauge wider financing distributions by banks, which could include purchase of corporate debts.

“We will go through this improvement in stages and in a measured way,” Martowardojo said, adding that the changes will start to be rolled out next year.

BI’s target of 10-12 percent loan growth in 2018 has taken into account of this inclusion. The central bank estimates 8 percent loan growth in 2017.

The central bank has cut the key interest rate by 200 basis points since the start of 2016 to boost economic growth, which has been hit by commodity downturn. (Reporting by Fransiska Nangoy and Cindy Silviana Editing by Jeremy Gaunt)

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