Bank Indonesia Strengthens Monetary Transmission with New Liquidity Incentives

Enhanced Macroprudential Liquidity Incentive (KLM) Framework

Bank Indonesia has introduced a new liquidity incentive policy effective December 16, 2025, aimed at accelerating credit growth through adjustments in the Macroprudential Liquidity Incentive (KLM) structure ¹

. The total incentive remains at 5.5% of third-party funds, with significant changes in allocation between different channels.

Key Changes in KLM Structure

1. Lending Channel Reduction: The incentive for lending to specific sectors has been reduced from 5% to 4.5%
2. Interest Rate Channel Enhancement: The incentive for banks to adjust their lending rates in line with BI's policy rate has been doubled from 0.5% to 1%
3. Remuneration on Excess Reserves: BI will provide remuneration at 3.50%, 25 basis points below the Deposit Facility rate

Credit Card Policy Extension

In addition to the new liquidity incentives, BI has extended the credit card relief measures until June 30, 2026, maintaining the minimum payment requirement at 5% of total billing and capping late fees at 1% of total billing with a maximum of Rp100,000 ⁴

.

Rationale and Expected Impact

The new measures address the slow transmission of monetary policy to credit growth. Despite cutting the BI rate by 125 basis points in 2025, credit interest rates only decreased by 24 basis points ²

. BI aims to stimulate lending while maintaining financial system stability through these targeted incentives.