After Recent LPS Rate Cut, Will Bank Rates Follow Suit?

By Editorial Team 28/01/2020
Summary

The Deposit Insurance Corporation (LPS) slashed the deposit insurance rate or LPS rate. They cut the rupiah insurance rate about 25 points, 6.00 percent for conventional banks, and 8.50 percent for Bank Perkreditan Rakyat (BPR). However, LPS did not change the deposit insurance rate of foreign currency since it would remain at 1.75 percent. The new policy will come into effect from January 25 to May 29, 2020.

LPS Chairman Halim Alamsyah, on Friday, January 24, said that the bank’s loan interest rate showed a declining trend even though it had been increasingly slowing down since Bank Indonesia (BI) stopped slashing the benchmark interest rate in October 2019. According to LPS’ assessment towards 62 reference banks, the interest rate only dropped eight bps on average to 5.28 percent of their interest rates during the observational period of November 12-December 9, 2019. On the other hand, the insurance rate for deposits in foreign currency ironically increased by one bps in 19 reference banks.

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