Bank Indonesia Aims to Further Relax a Reserve Requirement Rule

Bank Indonesia likely will keep its key interest rate unchanged on Thursday (18/01).(Reuters Photo/Iqro Rinaldi)

By : Tabita Diela | on 4:43 PM December 28, 2017
Category : Business, Economy

Jakarta. The country's central bank plans to further relax a rule on reserve requirements in 2018 to give banks more flexibility in managing their cash, deputy governor Mirza Adityaswara said on Thursday (28/12).

This would be the second loosening to a rule on how reserve requirements are calculated. In April, Bank Indonesia (BI) announced a change, which took effect in July, to existing rules that banks always keep 6.5 percent of their total deposits at the central bank.

Since July, banks have only had to keep a minimum 5 percent of deposits at BI on any day, but they need maintain at least a 6.5 percent average over a period of two weeks.

The change gave banks 1.5 percentage point of flexibility in managing daily reserves and was aimed at stabilising the money market.

"Looking ahead, the 1.5 percentage point will be enlarged, but of course we have to see the readiness of the money market and banks," Adityaswara said.

Last month, the central bank also said it would expand the implementation of reserve requirement rules to Islamic banks and to foreign currency deposits. The rule currently only apply to conventional banks and rupiah deposits.



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