OJK's Plan to Eliminate KBMI 1: A New Era for Indonesian Banking

Background and Regulatory Context

The Financial Services Authority (OJK) is set to eliminate the KBMI 1 category, which currently includes banks with core capital up to Rp6 trillion. This move is part of a broader effort to consolidate the banking sector and enhance its overall stability and efficiency. The KBMI 1 category comprises 61 banks as of June 2025, collectively holding approximately 10% of the industry's total assets and contributing around 6% to the total profits of the banking sector ¹

Industry Reaction and Perspectives

Bank representatives have expressed varying views on the OJK's plan. Yudi Dharma Nugraha from Bank Mega Syariah stated that his bank will comply with the new regulations and continue to focus on strengthening its capital, governance, and sustainable business growth. Pranata from BCA Syariah indicated that his bank is still studying the proposal and has not received formal notification from OJK regarding the elimination of KBMI 1. Anton Hermawan from Krom Bank Indonesia mentioned that his bank is continuously exploring strategic collaboration opportunities, including potential mergers and acquisitions, to expand its service reach and strengthen its product portfolio ¹

Economic Rationale and Potential Impact

Economists view the OJK's plan as relevant despite the improving profitability of KBMI 1 banks. Josua Pardede from Bank Permata noted that while the KBMI 1 banks recorded profits of Rp7.97 trillion as of June 2025, their contribution to the overall banking industry remains limited. He emphasized that consolidation is crucial for achieving scale efficiency, strengthening capital buffers, and enhancing risk management capabilities. The current macroprudential conditions, with high industry CAR at 26.15% and low NPL at 2.24%, provide a conducive environment for restructuring ²

Challenges and Opportunities Ahead

The elimination of KBMI 1 presents both challenges and opportunities. While it may lead to cost savings and increased competitiveness for consolidated entities, it also poses integration risks and potential reduction in service access for certain customer segments. Josua Pardede highlighted the need for careful planning and monitoring to mitigate these risks, including detailed risk-IT integration plans, post-merger stress tests, and clear transition phases. The regulator's role will be crucial in ensuring that consolidation does not harm consumer access to financial services or create anti-competitive market structures ²