LPS to Review Deposit Insurance Rate Amidst Bank Indonesia's Rate Cuts

Background on TBP Adjustment

The Indonesian Deposit Insurance Corporation (LPS) is preparing to determine the Deposit Insurance Rate (TBP) for the period January to April 2026. This decision will be based on the current state of bank deposit rates in the market. According to Anggito Abimanyu, Chairman of the LPS Board of Commissioners, banking deposit rates remain relatively high compared to the current TBP ¹

Current TBP and Deposit Rates

As of now, the TBP stands at 3.5% for rupiah deposits and 2% for foreign currency deposits. Despite Bank Indonesia having cut interest rates by 125 basis points throughout 2025, banking deposit rates have not decreased significantly. LPS had already reduced the TBP by 75 basis points cumulatively during 2025 ¹

Rationale Behind TBP

Anggito emphasized that the purpose of TBP differs from Bank Indonesia's interest rate policy. The primary goal of TBP is to protect depositors' funds, not to serve as a monetary policy transmission instrument. Therefore, LPS needs to observe market conditions, particularly deposit rates, before making any adjustments to the TBP ²

Future Considerations

The LPS is waiting to see how deposit rates develop, particularly by the end of December 2025, before finalizing the TBP for the upcoming period. Anggito mentioned that the LPS aims to ensure that as many deposits as possible remain insured. The final decision will heavily depend on the dynamics of deposit rates in the banking sector ²

Implications and Expectations

Anggito also expressed hope that the reduction in Bank Indonesia's benchmark interest rate would be followed by adjustments in banking sector interest rates, both for deposits and loans. This adjustment is expected to stimulate economic activity through lower lending rates ²