Bank Indonesia to Introduce BI-FRN Floating Rate Notes

Enhancing Market Depth and Benchmarking

Bank Indonesia is set to launch its new debt instrument, BI-FRN (Floating Rate Notes), on November 17, 2025. This financial product features a floating interest rate mechanism designed to support the development of a credible rupiah floating rate benchmark. The introduction of BI-FRN is part of BI's broader effort to deepen the Indonesian financial market through innovative instruments.

Distribution and Market Impact

The BI-FRN will be distributed by primary dealers to various financial institutions, including banks and non-bank entities. While this new instrument creates additional investment opportunities, it also has the potential to affect banking intermediation. According to Johannes Husin, Director of PT Bank OCBC NISP Tbk (OCBC), the establishment of a credible floating rate benchmark is a crucial step in market development.

Supporting Overnight Index Swap (OIS) Transactions

The BI-FRN is designed to serve as an underlying instrument or benchmark for Overnight Index Swap (OIS) transactions. OIS is an important hedging tool that allows market participants to manage interest rate risk by exchanging between fixed and floating rates. By providing a reliable benchmark, BI-FRN will enhance the functionality and attractiveness of OIS transactions in the Indonesian financial market.

Market Implications and Future Outlook

The introduction of BI-FRN represents a significant step in BI's efforts to enhance market liquidity and depth. While there are potential implications for banking intermediation, the overall impact is expected to be positive for market development. As the Indonesian financial market continues to evolve, instruments like BI-FRN will play a crucial role in providing diverse investment options and risk management tools for market participants.