Bank Indonesia Transitions to Transaction-Based Benchmark

Enhanced Transparency and Market Depth

Bank Indonesia is set to phase out the Jakarta Interbank Offered Rate (Jibor) and fully transition to the Indonesia Overnight Index Average (Indonia) as the primary money market benchmark effective January 1, 2026 ¹

. This significant change is designed to enhance market transparency and deepen the domestic funding market.

The transition process, which commenced in August 2018, represents Indonesia's alignment with global financial reforms aimed at adopting transaction-based benchmarks. The shift is expected to strengthen monetary policy transmission by using a rate that more accurately reflects market dynamics.

Market Implications and Challenges

The adoption of Indonia is seen as a positive development by financial institutions. Benny Aroeman, Head of Markets at Citibank Indonesia, noted that Indonia better reflects interest rate movements in the market, thereby supporting more effective monetary policy transmission.

However, challenges remain. Despite a 125 basis point reduction in the benchmark interest rate throughout the year, loan interest rates have only decreased by about 24 basis points, indicating sluggish credit demand. The new benchmark is expected to help address this by promoting more effective interest rate transmission.

Regional Context and Future Outlook

This move aligns Indonesia with other Southeast Asian countries like Thailand and Malaysia, which have also introduced new market-based benchmarks. While some market participants remain comfortable with forward-looking benchmarks, the transition is progressing smoothly according to Wiwig Santoso of PT Bank SMBC Indonesia Tbk.

The daily average transaction value is expected to increase to Rp81 trillion by 2030 from Rp54 trillion in October 2025, underscoring the importance of transaction-based benchmarks in enhancing market efficiency.