New Monetary Instruments Can Accelerate Cost Reduction Fund

Bank Indonesia said its latest monetary instruments “7-Day Reverse Repo Rate” and limit formula equal to the interest savings and the provision of funds by the central bank to bank, will effectively lower the cost of bank funding, which in turn will lower the credit interest ,
BI Senior Deputy Governor Mirza Adityaswara on Monday, said interest “7-Day Reverse Repo” with a reference period shorter time will increase its influence on the financial markets, including the cost of bank funding of the acquisition of funds in the interbank money market (interbank).
In addition, the bank also received allowances for other liquidity facilities of facilities for provision of funds by the central bank.Because the interest rate rupiah provision of funds to banks from BI or “lending facility / LF rate” will be kept up to 75 basis points of interest “7-Day Reverse Repo Rate”, beginning August 19, 2016.
“So, if for example,” 7-Day Reverse Repo Rate “it remains 5.25 percent on August 19, 2016 RDG, if for example it fixed tablets yes, then LF Rate will also go down,” he said.Current level “lending facility” by 7 percent.
BI also on August 19, 2016, will keep the lower limit of the placement of rupiah funds (deposit facility) by the Bank in BI by 75 basis points from the “7-Day Reverse Repo Rate”.
Potential reduction in the cost burden of these funds should be followed by a decline in deposit rates, because banks have been easier to obtain liquidity or do not need to rely on acceptance of deposits that are a source of funding expensive.
If the deposit rate can fall, banks have more room to lower interest credit, because the load is factored into the loan interest reduced.
However, Mirza said the decline in deposit rates will also be dependent on the confidence of banks, to not worry about being left depositors because of lower interest rates on deposits.
“Therefore, the decline of interest will also depend on the behavior of depositors and other factors in addition to the deposit,” he said.
“Should banks can implement more flexible pricing,” added Mirza ..
Finance and Treasury Director of Bank Mandiri, Pahala N. Mansury said the FSA will also need to respond to the potential reduction in interest rates “lending facility” to be maximal utilized by the bank.
“If LF seen something good, but not used can be less than the maximum yes,” he said.


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