Indonesia's Rural Bank Sector Sees Increased Mergers Driven by OJK's Consolidation Push

Strengthening Industry Structure Through Consolidation

The Financial Services Authority (OJK) has revealed that the merger process among Rural Banks (BPR) continues to gain momentum, reflecting a positive trend in line with the roadmap for developing and strengthening the BPR and Rural Sharia Banks (BPRS) industry. As of the latest update, OJK is processing the consolidation of 226 BPR/BPRS into 79 entities, demonstrating significant industry restructuring.

Strategic Objectives Behind the Merger Wave

The consolidation is seen as a crucial strategy to create BPR institutions with more adequate business scale, stronger capital, and better governance and risk management practices. OJK believes this will not only strengthen the role of BPR/BPRS but also enhance synergy with Regional Development Banks (BPD) as drivers of local economic growth. The authority has already approved the merger of several BPR, including the consolidation of Bank Kabupaten Cirebon (BKC) and Bank Cirebon Jabar (BCJ) in Cirebon Regency.

Regional Significance and Implementation

The merger of BPR in Cirebon was initiated by the West Java Provincial Government's directive to consolidate regional BPR under provincial control, aiming to strengthen the financial industry structure. OJK Cirebon Head Agus Muntholib emphasized that this consolidation goes beyond legal entity integration, representing a regional strategy to create stronger and more efficient BPR. The consolidation is expected to result in more solid capital, expanded credit services, and enhanced competitiveness against other financial institutions.

Notable Consolidations Across Regions

Several other significant mergers are underway, including the planned consolidation of PT BPR Rejeki Insani, PT BPR Dutabhakti Insani, and PT BPR Bina Kharisma Insani into PT BPR Bina Sejahtera Insani. This merger, announced in June 2025, is based on OJK Regulation No. 7/2024 regarding BPR and BPRS. Post-merger, PT Insani Investama will hold a 93% stake valued at Rp96.34 billion, creating a stronger entity with broader networks and greater lending capacity for MSME players.

Industry-Wide Implications

The consolidation trend is not limited to conventional BPR. Muhammadiyah, a major Islamic organization, is exploring the merger of its BPRS units to form a full-fledged Islamic Commercial Bank (BUS). The organization's chairman, Anwar Abbas, noted strong support from OJK for this initiative, with two BPRS in Yogyakarta and Semarang leading the consolidation efforts. This move is part of a broader strategy to strengthen Islamic financial institutions in Indonesia.

Regulatory Framework and Future Outlook

The mergers are conducted under the regulatory framework provided by the Financial Services Authority, particularly POJK No. 7/2024. The latest development includes the merger of two BPR in Nusa Tenggara Barat (NTB), which was completed in March 2025 to meet the minimum core capital requirement as mandated by Law No. 4/2023 on Financial Sector Development and Strengthening (PPSK). OJK NTB Head Rudi Sulistyo highlighted that the consolidation would enhance capital strength, improve IT infrastructure, and strengthen risk management practices, ultimately boosting the competitiveness of the BPR/S industry in NTB.