Inflation Rises, Bank Interest Will Also Rise

inflation rate

The trend of inflationary growth has begun to be seen due to rising prices for several commodities, especially food commodities. Therefore, the room for adjustment of bank credit interest rates is also increasingly opened.

If inflation heats up, Bank Indonesia (BI) will find it difficult to maintain the benchmark interest rate, the BI 7-Day Reverse Repo Rate (BI7DRR), which is currently at 3.5 percent.

This is also exacerbated by the increase in the rate of Value Added Tax (VAT) from 10 percent to 11 percent starting April 1, 2022. This increase will have an impact on increasing the price of goods and eventually also attract inflation.

In the last 5 years, the average loan interest rate has been in a downward trend, although the range is thin. In 2018 the average loan interest rate was still at the double-digit level, namely 10.8 percent, while until February 2022, the average loan interest rate was at the level of 9.11 percent.

This means that loan interest rates have fallen by 169 basis points in the last 5 years. On the other hand, the one-month deposit rate has fallen by more than 400 basis points.

President Director of PT Bank Rakyat Indonesia (Persero) Tbk. Sunarso said the current global situation affected the inflation rate. As a result, sooner or later credit interest rates will be raised.

“It’s just a matter of how much the increase is still being discussed,” he said in a Hearing Meeting with Commission VI DPR, Wednesday (30/3).

The same thing was stated by the President Director of PT Bank Negara Indonesia (Persero) Tbk. Royke Tumilaar. He said that currently, the trend of loan interest rates is on an upward trend.

Even though some of these problems occurred, he said that in raising credit interest rates, banks would look at the condition of their customers. According to him, banks will not immediately increase lending rates under current conditions.

On the other hand, the President Director of PT Bank Mandiri (Persero) Tbk. Darmawan Junaidi said that loan interest rates had undergone many adjustments. The company’s average loan interest in 2020 is at the level of 7.17 percent. Currently, the company’s average loan interest is around 6.7 percent.

However, considering the global situation and the upward trend in inflation, said Darmawan, interest rates are likely to rise. This is at least reflected in the policy of Bank Indonesia (BI) which has increased the minimum statutory reserve requirement (GWM) so that it has an impact on reducing liquidity in the market.

Furthermore, Deputy Commissioner for Public Relations and Logistics of the Financial Services Authority (OJK) Anto Prabowo said that OJK continues to encourage the formation of more efficient banking interest rates. In general, until February 2022, interest rates will continue their downward trend.

The weighted average loan interest rate for working capital loans, investment loans, and consumption loans in February 2022 was recorded at 9.02 percent, down from the previous period.