Bank Indonesia Strengthens Macroprudential Incentives to Boost Credit Growth

New Incentive Schemes

Bank Indonesia (BI) is introducing enhanced macroprudential policy incentives (KLM) effective December 1, 2025, designed to stimulate credit growth and accelerate the transmission of monetary policy to banking interest rates. The new incentives will be channeled through two primary mechanisms: the lending channel and the interest rate channel.

Lending Channel Incentives

The lending channel scheme is designed to provide banks with greater liquidity to disburse credit in line with their growth commitments. BI reported credit growth reached 7.7% year-on-year in September 2025, but the central bank aims to drive this growth further. The incentives will be provided upfront based on banks' reported credit disbursement commitments, representing a forward-looking assessment.

Interest Rate Channel Incentives

BI is also offering additional incentives through the interest rate channel to encourage faster transmission of policy rate changes to banking interest rates. Despite cutting the BI Rate by 150 basis points over the past year, banking credit interest rates have only decreased by 15 basis points. The incentive structure is based on the elasticity of credit interest rates to the BI Rate, with banks showing higher elasticity receiving greater incentives.

Key Details of the Incentive Structure

1. Lending Channel: Up to 5% of third-party funds (DPK)
2. Interest Rate Channel: Up to 0.5% of DPK
3. Total Potential Incentive: Maximum 5.5% of DPK
4. Eligibility Criteria: Based on credit growth commitments and interest rate adjustment speed

Impact and Objectives

The primary goal of these incentives is to ensure banks have sufficient liquidity to support credit expansion, particularly in four priority sectors. By providing these incentives, BI aims to stimulate stronger credit growth and improve the effectiveness of monetary policy transmission. For example, a bank with IDR 100 trillion in DPK could receive up to IDR 5.5 trillion in incentives, significantly boosting their liquidity for credit disbursement.