Notes 1: On Indonesian Liquidity

After Purbaya commands HIMBARA to inject 200 Trillion IDR into the economy, i always questioned about how this policy will make change in the short term. According to the textbook, i knew that every money that injected into national economy will always make a change in the money supply. But, we don’t know how effective this policy is after we knew that HIMBARA Loan to Deposit Ratio (LDR) has been relatively high. For example; BNI LDR are now at 95,7% in february 2025 (KONTAN,2025). Which mean that every deposit that has been stored in BNI, 9 outta 10 has been used for loan. Mandiri too already reached 92,5% in the same month. This is way beyond the critical level at 92% according to Chamber of Banking Sector According Their Capital (KBMI).

The banking sector actually facing a high level of credit demand, but they faced low level of deposit supply. At Mandiri, the level of credit demanded has increased at about 19% YoY, while their deposit are just increasing at about 1,4% YoY. The massive growth of credit actually are the result of macroeconomics policy from BI in January and February. BI has decided to cut the interest rate by 25 BPS to 5,75% from 6%. This make the private sector have an appetite to loan and expand their business hence why the credit grows are so big in 2025. While the credit are expanding, the number of deposits are low because the deposit lending facility rate are low in this period.

So, are Purbaya decision to put Indonesian government money at HIMBARA as their depositor are correct?

I think, yes that’s correct. We can see that, from the LDR levels of each bank, we actually are underliquid. Loan demand are increasing, while deposits are stagnating. National interest rate has been cutted at 125 BPS from December 2024, this make us a very appealing country for investment. But, our national saving are just too low to accommodate the growing demand for financing investment project. So, Purbaya decision to put 200 Trillion IDR into the banking sector (especially HIMBARA) are correct regarding the high number of LDR and credit demand in Indonesia banking sector.

Those 200 Trillion IDR will create a buffer space for every bank that participates in this policy. But it also create a burden to them. If those bank aren’t allocate those funds as fast as possible, they will suffer from the cost of deposits interest that accumulate from those deposits. Thus the risk of Non Performing Loans will appear.

So, to reduce the number of NPL from this sudden injection of money. Indonesian government ought to have a clear path on how the money should be spent, on what sector that needs credit the most. After that, the banking sector must assest every option that already been choose by the government. Therefore, the banking sector can reduce the number of NPL and create a perfect policy mix to liquidate the economy.