Consumers appear to have missed out on the benefits of a new central bank policy forcing major lenders to publish their prime lending rates.
Evidence shows that there has been neither a decline in the interest rates charged by banks nor has there been a significant increase in the growth of lending.
Instead, banks have used the policy, intended to foster greater transparency and competition, to cut overhead costs and fatten profit margins.
Bank Indonesia in March introduced a requirement for the nation’s 43 largest banks, about a third of the total, to publish rates for creditworthy customers.
Among the lenders are Bank Mandiri, Bank Rakyat Indonesia, Bank Central Asia, Bank Negara Indonesia and CIMB Niaga.
Banks responded to the reform by slashing costs, but banks would not say how many employees were dismissed in their push to curb overhead expenses.
Since the policy came into effect, BI data showed the lending rate was either little changed or increased among the 43 banks.
Wimboh Santoso, a director of banking research and supervision at BI, said the drop in overhead costs should theoretically help the banks reduce the lending rate they charge customers, particularly in lending to manufacturers and for working capital.
“It’s too early to say that the policy has resulted in lowering the borrowing cost to customers,” Wimboh said.
Commenting on the commercial banks’ decision to direct cost savings to bigger margins rather than passing the benefits on to consumers, Wimboh said BI would “scrutinize” it. “If banks lowered the interest rate they could disburse more loans and therefore their revenue would be relatively unchanged,” he said.
Indonesian banks calculate their prime lending rate based on the cost of funds, margin and overhead cost. The cost of funds is the interest banks pay depositors, and the overhead cost measures the efficiency of bank operations. Actual interest rates, however, depend on customers’ risk profile, factoring in their financial condition, business type, age and location.
Since March, the prime lending rate for the corporate sector rose 2 basis points (0.02 percentage point) to 11.03 percent, while for the retail sector, the rate dropped 2 basis points. Meanwhile, for mortgage and non-mortgage loans, the rate climbed by 20 and 26 basis points, respectively. During that time, the BI rate has remained unchanged on 6.75 percent.
The banks have been able to reduce their overhead costs by 40-70 basis points in the first four months of the policy.
“The overhead cost in corporate lending dropped from 3.12 percent in March to 2.6 percent in June,” Wimboh told reporters last week. On a Rp 100 billion ($12 million) loan that means savings of Rp 52 million.
The biggest drop in overhead costs occurred in retail lending — by 70 basis points to 2.75 percent over the same period — as banks cut costs in branches servicing business clients, Wimboh said.
“This policy worked as banks looked at their peers [rate] and said to themselves ‘if they can do that, we can do it too,’ ” Wimboh said.
The policy aimed to encourage transparency and competition among banks and improve efficiency in the country’s banking system. Indonesia’s banking system is known for its inefficiencies, which pushed many to the brink of collapse during the 1998 Asian financial crisis.
“Indonesian banks are far less efficient than banks in other countries,” said Miranda S. Goeltom, a former senior deputy governor of Bank Indonesia. “It’s a good thing that the central bank focuses on improving banks’ efficiency,”
As of mid-August, lending was up 24 percent on a year earlier, but this rate of growth is largely unchanged and only just eclipses the 23.5 percent lending growth target set by BI.
SUMBER
Evidence shows that there has been neither a decline in the interest rates charged by banks nor has there been a significant increase in the growth of lending.
= Bukti menunjukkan bahwa tidak terjadi penurunan suku bunga yang dibebankan oleh bank juga belum terjadi peningkatan yang signifikan dalam pertumbuhan kredit.
Since the policy came into effect, BI data showed the lending rate was either little changed or increased among the 43 banks.
= Sejak kebijakan tersebut mulai berlaku, data BI menunjukkan suku bunga pinjaman yang baik sedikit berubah atau meningkat antara 43 bank.
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