Executive Summary

Key insights and market outlook

Bank Indonesia (BI) urged banks to accelerate credit rate reductions following the government's injection of Rp276 trillion into state-owned banks ¹

. Despite the liquidity boost, credit growth remained sluggish at 7.36% YoY in October 2025, below the target range of 8-11% ². The undisbursed loan amount surged to Rp2,450.7 trillion, indicating weak credit demand due to businesses' cautious expansion plans and relatively high lending rates ³.

Full Analysis

02

Deep Dive Analysis

Bank Indonesia Pushes for Faster Credit Rate Cuts After Massive Liquidity Injection

Government Injects Rp276 Trillion into State Banks

The Indonesian government has injected a total of Rp276 trillion into state-owned banks through two tranches: Rp200 trillion in September 2025 and an additional Rp76 trillion in November 2025 ¹

². This liquidity injection aimed to stimulate credit growth and boost economic activity. Despite this significant boost, credit growth remained subdued, reaching only 7.36% year-on-year (YoY) in October 2025, down from 7.7% in September 2025 ³.

Sluggish Credit Growth and High Undisbursed Loans

Bank Indonesia reported that the undisbursed loan amount surged to Rp2,450.7 trillion in October 2025, equivalent to 22.97% of total available credit ²

. This increase indicates that businesses are not utilizing available credit facilities, likely due to cautious expansion plans and relatively high lending rates. Governor Perry Warjiyo attributed the sluggish credit demand to businesses' wait-and-see approach and high credit costs ³.

BI's Call for Action

In response to the slow credit growth, BI Governor Perry Warjiyo urged banks to expedite credit rate reductions following the government's liquidity injection ¹

. Warjiyo emphasized that the monetary easing measures and government liquidity support should be accompanied by faster lending rate cuts to stimulate borrowing. Despite a 125 basis point reduction in BI rate, lending rates have decreased by only 20 basis points, indicating a slow transmission of monetary policy ³.

Economic Implications

The slow credit growth has implications for Indonesia's economic growth prospects. BI forecasts credit growth to remain at the lower end of the 8-11% target range in 2025 but expects an improvement in 2026 ²

. Chief Economist Helmi Arman of Citi Indonesia noted that the liquidity injection would strengthen banks' capacity to lend, potentially boosting credit growth in the future ⁴.

References