BI Applies New KLM and RIM Schemes to Press Credit Interest Rate Increases

Bank Indonesia (BI) will implement a new formulation in strengthening the Macroprudential Liquidity Policy (KLM) and Macroprudential Intermediate Ratio (RIM) starting in the second semester of 2026. This policy is designed to contain the impact of the BI Rate increase on bank interest rates, while maintaining the stability of liquidity conditions and credit growth. Director of the Macroprudential Policy Department of Bank Indonesia Dhaha P. Kuantan explained that the policy adjustment was carried out so that the increase in the BI Rate was not immediately followed by an aggressive spike in credit interest rates and deposit interest rates by banks. He said that previously the KLM design was more focused on accelerating the transmission of the BI Rate reduction to credit interest rates. However, after BI raised the BI Rate by 50 basis points to 5.25 percent, the policy direction was adjusted so that the transmission of interest rate increases could take place more controlled. According to Dhaha, the new scheme will take into account the spread between the BI Rate and the credit interest rate so that banks that do not increase credit interest excessively when the BI Rate rises will still receive incentives from BI. "Later it will be calculated based on the spread between the BI Rate and the credit interest rate. So when the BI Rate rises but banks do not significantly increase the credit interest rate or are not manageable, banks will receive incentives," he said in a Journalist Training in Makassar, quoted Sunday, May 24. The KLM incentive is in the form of easing the Minimum Mandatory Giro (GWM) for banks that are able to meet the target for credit and financing in priority sectors, thus, a portion of the funds that were previously required to be placed at BI can be used to support financing the real sector. In the new mechanism, BI will provide full incentives to banks that are able to maintain the spread of credit interest rates against the BI Rate at a level that is still considered reasonable, for example, if the credit interest spread is in the range of 3 percent, banks can still obtain full incentives and vice versa, if the spread increases too high, incentives will be reduced or even stopped. "The hope is that even though the BI Rate has increased, the increase in credit interest rates will be more manageable so that the transmission to credit growth continues," he said. In addition to strengthening the interest rate transmission channel, BI also strengthens the financing channel and financing to funding channel scheme to maintain the flexibility of managing banking liquidity. Dhaha said that BI assessed that the current banking funding pressure was getting bigger due to the tight competition in raising funds, both between banks and with other financial instruments. Therefore, he added, BI adjusts the RIM policy by expanding the scope of non-Third Party Fund (DPK) funding sources as well as non-credit financing that can be taken into account in the intermediation ratio. Through this policy, banks are expected to have greater flexibility in managing the funding and financing side. In addition, BI also strengthened the relaxation of macroprudential policies to increase liquidity and banking intermediation flexibility, including through non-credit financing and non-DPK financing. One of the steps taken is to expand the scope and strengthen the criteria for corporate securities and corporate Islamic securities owned or issued by banks as a component of the RIM calculation. This policy will take effect on July 1, 2026. In addition, BI strengthens synergy with the government and various stakeholders through the Indonesian Intermediation Acceleration Program (PINISI) to maintain high credit and financing growth, both in terms of banking supply and business demand. BI will also deepen the publication of assessments of the transparency of the Base Credit Interest Rate (SBDK), including in priority sectors that fall within the scope of the KLM. Dhaha added that the KLM scheme is now designed to be more forward-looking, and in this mechanism, banks are required to submit a commitment to the credit growth target first before obtaining liquidity incentives from BI. According to him, with this scheme, BI wants to ensure that the liquidity from the easing of GWM is really used to support the distribution of credit and productive financing, not diverted to other assets.