Indonesia’s Financial Services Authority warned lenders about the risks of offering aggressive special deposit rates as funding costs climb across the banking sector. Deposit rates have risen alongside the elevated Bank Indonesia benchmark rate.
Climbing funding costs
In July 2026, the deposit interest rate climbed 39 basis points month-on-month. The weighted rupiah third-party funds interest rate rose 19 basis points over the same month, reflecting heightened competition among lenders seeking to retain liquid balances.
Weighted credit interest rates rose less. The weighted rupiah credit interest rate climbed 7 basis points month-on-month in July 2026.
Risks to bank margins
Lenders offer special deposit rates to gather and maintain funds from corporate, institutional, and high-net-worth depositors with large balances. Aggressive competition raises the cost of funds. That margin pressure squeezes bank profitability and restricts the banking system’s capacity to reduce lending rates across the domestic economy.
Dian Ediana Rae, Chief Executive of Banking Supervision at the Financial Services Authority, said the authority views that the provision of special rates needs to be carried out in a measured manner. Rae added that the regulator urges banks to manage funds prudently and gradually adjust their interest rates, taking into account liquidity conditions, funding structure, cost of funds, and the sustainability of the intermediation function so that they remain in line with market conditions and healthy financial ratios.
Source: Indonesia's Financial Services Authority
