Indonesian Banking Sector Sees Contrasting Moves on Shariah Units and Small Banks

OJK's Plan to Eliminate Small Banks

The Financial Services Authority (OJK) is planning to eliminate the smallest bank category, known as KBMI 1, which includes banks with core capital less than Rp6 trillion. This move is part of OJK's efforts to strengthen the national banking structure through consolidation ¹

Acceleration of Shariah Unit Spin-offs

Contrasting with OJK's plan to eliminate small banks, several major Indonesian banks are accelerating the spin-off of their Shariah business units. PT Bank Syariah Nasional (BSN) has already been established following the spin-off from PT Bank Tabungan Negara (Persero) Tbk. (BBTN). Other banks like Maybank Indonesia and CIMB Niaga are also progressing with their spin-off plans, targeting completion by 2027 ¹

Regulatory Drivers

The spin-off acceleration is driven by OJK regulations, specifically POJK No. 12/2023, which requires banks to spin off their Shariah units if the assets of these units reach Rp50 trillion or 50% of the parent bank's total assets. This regulation aims to promote the growth of Shariah banking in Indonesia by allowing these units to operate more independently and competitively ²

Market Reaction

The stocks of smaller banks (KBMI 1) have shown positive performance in early 2026, with some experiencing significant gains. For instance, PT Bank Bumi Arta Tbk. (BNBA) saw its stock price increase by 23.86% at one point. Analysts attribute this positive performance to improving financial performance and potential consolidation through mergers ¹

Implications

The contrasting moves by OJK and Indonesian banks reflect a broader strategy to strengthen the banking sector. While OJK aims to consolidate smaller banks, the spin-off of Shariah units is expected to enhance their competitiveness and contribution to the national economy.