Indonesia to place funds in state banks to support economy

Jakarta

INDONESIA'S finance minister said on Wednesday the government will shift 30 trillion rupiah (S$2.9 billion) from its account at the central bank to four state banks so they can use the funds to expand lending and support the economy.

In a streamed briefing, Sri Mulyani Indrawati said lending must target the real sector of the economy and banks had been asked to apply an interest rate of 80 per cent of the central bank's benchmark rate - which is now at 4.25 per cent. Commercial banks currently pay 5.5 per cent for most term deposits. South-east Asia's biggest economy is set to contract for the first time since 1999 in April-June as businesses are forced to shut and lay off workers amid the coronavirus pandemic.

Commercial banks are also under pressure. The Financial Services Authority (OJK) expects 15.3 million customers to request loan restructuring totalling 1,352.5 trillion rupiah. Half of that amount was already under restructuring as of June 15, OJK data showed. The government funds will be placed with Bank Rakyat Indonesia (BRI), Bank Mandiri, Bank Negara Indonesia (BNI) and Bank Tabungan Negara (BTN).

"We hope with the funds' low interest rate, the state banks can take steps that would support the real sector through extension of credit at a lower lending rate," Ms Indrawati said.

BRI chief executive Sunarso, who uses one name, told the briefing the government had asked the banks to leverage the funds by 300 per cent in three months.

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BRI - the country's biggest bank by assets - would prioritise lending to farmers and food and medical equipment businesses, Mr Sunarso said. REUTERS