State-Owned Banks Boost Foreign Currency Deposit Rates to Attract Capital

Significant Rate Hike in Valas Deposits

In a coordinated move, Indonesia's four state-owned banks (Himbara) have increased foreign currency deposit rates to up to 4% per annum. The banks involved are PT Bank Mandiri Tbk, PT Bank Negara Indonesia Tbk, PT Bank Rakyat Indonesia Tbk, and PT Bank Tabungan Negara Tbk. This strategic decision aims to attract more foreign currency deposits, particularly from abroad, by offering more competitive rates compared to previous offerings that ranged between 1.5% to 3%.

Divergent Response from Private Banks

The rate hike by state-owned banks has created a divergence in the banking sector, as some private banks have chosen not to follow suit. These private institutions have opted to maintain their existing foreign currency deposit rates. This decision reflects differing strategies within the banking industry regarding how to manage foreign currency deposits and compete for liquidity.

Market Implications

The increased rates by Himbara banks are expected to enhance their attractiveness to foreign investors and potentially boost foreign currency inflows. This move is particularly significant in the context of Indonesia's economic landscape, where attracting foreign capital is crucial for maintaining currency stability and supporting economic growth. The contrasting strategies between state-owned and private banks will likely influence the competitive dynamics within the banking sector.