JAKARTA: The banking industry is expected to see higher loan growth after a sluggish performance last year, as Finance Minister Purbaya Yudhi Sadewa decides to extend the state liquidity injection for another six months.
A Financial Services Authority (OJK) executive has welcomed the move, reasoning that the initial six-month placement of state funds in commercial banks was “not enough” to boost lending, especially in the micro, small and medium enterprise (MSME) segment.
“I hope that it can be extended as long as possible, even for years, but the government has its own fiscal strategy, and the SAL (surplus government funds previously held at Bank Indonesia) can be withdrawn at any time,” said OJK’s banking supervision chief executive Dian Ediana Rae.
Dian said the extended liquidity injection would ease competition to secure funding, thereby limiting the need for banks to offer high-level “special rates” to attract new deposits.
“If credit becomes more affordable, we hope it will boost lending to MSMEs this year,” he added.
MSME loan issuance was down 0.5% year-on-year (y-o-y) in January, continuing a contraction pattern recorded in the segment since October 2025, according to data from Bank Indonesia (BI).
Dian attributed the sluggish growth in MSME lending to banks’ efforts to clean up their balance sheets and curb bad loans, while expressing hope that performance in the segment would “bounce back” this year, and that banks would “come up with better targets”.
The OJK has set a loan growth target of 10% to 12% for this year. Credit growth was subdued for most of last year, hovering at around 7% y-o-y from June through November.
However, loan growth increased to 9.69% y-o-y in December and then to 9.96% y-o-y in January.
The state liquidity injection began in September last year, when the government moved 200 trillion rupiah of its cash deposit from BI to its accounts at state-owned banks.
Purbaya moved another 76 trillion rupiah in November but then withdrew 75 trillion rupiah in January, leaving a total of 201 trillion in its accounts at Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia, Bank Tabungan Negara, Bank Syariah Indonesia and Bank Jakarta.
The deposits were set to mature on March 13, but the policy extension will push back the maturity date to September.
Purbaya said yesterday that the government was planning “further evaluation” of the policy, hinting at the possibility of a subsequent extension after September. — The Jakarta Post/ANN
