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Indonesia’s Big Banks Resist Pressure to Lower Lending Rates

  • Loans shrank first time on record, falling 0.47% in October
  • Weak demand, ongoing restructuring weigh on loan growth
Outside the Bank Indonesia headquarters in Jakarta, Indonesia. People are limiting their spending as unemployment surges to a nine-year high and businesses are delaying investments as the country grapples with Southeast Asia’s worst coronavirus outbreak, at more than 500,000 total cases.

Outside the Bank Indonesia headquarters in Jakarta, Indonesia. People are limiting their spending as unemployment surges to a nine-year high and businesses are delaying investments as the country grapples with Southeast Asia’s worst coronavirus outbreak, at more than 500,000 total cases.

Photographer: Dimas Ardian/Bloomberg
Updated on

Indonesia’s lenders are pushing back against central bank pressure to further lower interest rates for their customers, a step policy makers believe can help pull the economy out of recession.

The banks say the real problem is that people don’t want to borrow in the first place. Loans shrank in October for the first time on record, down 0.47% from the year-earlier period. Bank Indonesia Governor Perry Warjiyo said the contraction was due to lenders’ risk-averse attitude and could have been avoided if they had lowered rates for customers in line with central bank easing.