Bank Indonesia Launches Innovative BI-FRN to Boost Financial Markets

Developing OIS Market and Transaction-Based Benchmark

Bank Indonesia (BI) is set to issue its first BI-Floating Rate Notes (BI-FRN) on November 17, 2025, marking a significant development in Indonesia's financial markets. The BI-FRN will have maturities ranging from 1 to 12 months and feature a floating interest rate based on Compounded INDONIA (Indonesia Overnight Index Average).

Key Features of BI-FRN:

• Floating rate structure based on Compounded INDONIA
• Flexible tenors between 1-12 months
• Tradable in secondary markets
• Open to non-bank investors through sub-registry
• Delivery-versus-payment settlement in BI-SSSS/RTGS system

Addressing Current Market Limitations

The introduction of BI-FRN addresses several current market limitations:

1. Limited OIS market development: Current daily OIS transactions are approximately Rp60 billion
2. Need for better interest rate hedging instruments
3. Transition from quote-based to transaction-based benchmark

Market Impact and Future Developments

The successful implementation of BI-FRN is expected to:

• Enhance liquidity in money markets
• Improve price discovery for interest rate instruments
• Support the development of a more robust OIS curve
• Strengthen monetary policy transmission

Expert Insights

Josua Pardede, Chief Economist at PT Bank Permata Tbk., believes that the BI-FRN will be a crucial catalyst in reforming Indonesia's domestic interest rate benchmark. The combination of BI-FRN and OIS matchmaking mechanism is expected to create a more liquid transaction ecosystem and accelerate the formation of a market-based interest rate curve.

The development of OIS market will provide banks and corporations with a more reliable reference for floating-rate contracts, loan pricing, and interest rate risk hedging. This move is part of BI's broader strategy to enhance monetary policy transmission and develop Indonesia's financial markets.