Bank Indonesia Notes Adequate Banking Liquidity Despite Some Banks Seeing Declines

Bank Indonesia (BI) has reported that the nation's banking liquidity remains adequate overall, despite a noticeable decline in liquidity within certain bank groups. This trend is attributed to credit expansion growing at a faster pace than the accumulation of third-party funds (DPK).

Alexander Lubis, Director of BI's Macroprudential Policy Department, explained that the disparity between loan and deposit growth is a key factor affecting liquidity. "Although liquidity remains adequate overall, a number of bank groups are beginning to experience a decline," he stated during a BI media briefing in Jakarta.

Data from July shows that banking credit expanded by 13.6% year-on-year, significantly outpacing the 7.7% growth in third-party deposits. While the industry's liquid assets to third-party deposit ratio (AL/DPK) stood at a healthy 23.10% in July, specific bank categories saw reductions. For instance, state-owned banks (BUMN) experienced a slight drop in their AL/DPK ratio from 16.18% in June to 16.12% in July. Regional Development Banks (BPD) saw a more pronounced decrease, falling from 25.61% to 23.93%.

Conversely, some bank groups, including National Private General Banks (BUSN) KBMI 3 and 4, and foreign bank branches (KCBA), reported increases in their AL/DPK ratios. BI affirmed that the banking sector's resilience is underpinned by strong capital, managed credit risk, and sufficient liquidity. The central bank is now focusing on optimizing liquidity by adjusting incentives to better support intermediation and money market activities, ensuring funds are channeled effectively rather than remaining solely in securities.

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Because credit growth is faster than DPK growth. So, although liquidity remains adequate overall, a number of bank groups are beginning to experience a decline.