State-Owned Banks Drive Credit Growth Amid Economic Challenges

Double-Digit Expansion

State-owned banks in Indonesia have achieved double-digit credit growth of 10.28% year-on-year as of November 2025, significantly outpacing the industry average of 7.74%. This performance is particularly notable given the current economic conditions where overall credit growth remains subdued. The strong credit expansion by state-owned banks contrasts sharply with private banks, which recorded a more modest growth of 5.42% during the same period.

Economic Context and Implications

The divergence in credit growth between state-owned and private banks highlights the different factors at play. State-owned banks' robust performance is largely attributed to their role in supporting government initiatives and projects. Economist Josua Pardede from Bank Permata suggests that the more moderate growth seen in private banks may be a more accurate reflection of actual credit demand, which remains sluggish.

Sectoral Analysis

The credit growth disparity between state-owned and private banks also raises questions about the underlying economic conditions and the quality of credit. While state-owned banks' growth is driven by government-backed projects, private banks' more cautious lending reflects concerns about credit quality, particularly in segments like micro, small, and medium enterprises (UMKM) which are considered higher risk.

Market Implications

The current credit growth dynamics suggest a complex economic landscape where state-led initiatives are driving banking sector performance. While this supports short-term economic activity, it also highlights potential risks related to credit quality and the sustainability of growth driven by government projects rather than organic demand.