The competition to raise
public capital among bank in Indonesia was seen to heighten. Apparently, bank’s
strengthened the strategy for financing capacity to keep up with credit growth.
Lately, bank’s were
adjusting fixed deposit interest rate to motivate the people to place their
fund. The interest level allowed for depositors even exceeded the limit set by
Deposit Insurance Agencies [LPS].
Not just that, bank’s were
also making gimmicks of prize offering for savings account. There were even
banks which offered interest equal to fixed deposit interest.
Some banks maintained
gimmicks of prize of fering while preparing savings account equal to fix
deposit, because they planned to increase portion of low cost fund, i.e.
savings account and giro. Lately there was also some private banks which
planned to launch new savings account products called internet Savings.
The Internet Saving Account
offered interest higher than conventional savings account which was today
around 3% - 5 % per year. As the name indicated, the customer must use internet
facility to open the saving account. This private bank felt it necessary to
launch low cost fund because in Q-1 last year, the bank posted downturn in growth
of cheap fund.
In fact there were other
options that banks could take to raise public fund. The stockmarket was also a
way to obtain fund by issuing promissory notes. However this was not widely
applied as the requirement for it was not easy. So the conventional way of increasing
deposit interest through attractive marketing gimmicks was something to rely
on.
In fact the signals of
banks having difficulty in raising third party fund from the people had been
apparent since Q-4 of 2014. Some first tier private banks were aggressively
increasing fixed deposit interest; and even some medium and small banks were
following that trend while some BUMN banks seemed slow in adjusting deposit
interest rate.
Only after the interest
rate level, especially deposit interest was starting to climb up to around 200
basic points since Q-4 last year, BUMN banks were starting to adjust their
deposit interest rate. Unfortunately adjustment of interest rate at BUMN banks
were sort of too late because price in process was already happening sooner in
the market.
It was reasonable to
conclude that the competition to grab third party fund by banks had arrived at
fearful level as offering of special rate was mushrooming. The pragmatic recipe
of attracting depositors was by way of offering special rates like Deposit
insurance plus 2 % - 3% plus other benefits like offering give away goods:
handphones, laptops, i-phone etc.
The same trend was
happening at the interbank moneymarket [PUAB] as catalyst to see the liquidity
level at the market. Last year, PUAB interest was around 4.5% but was now
moving up to around 5.8%. Meaning price of fund was getting more expensive as
many banks fighting over it.
To refer to Loan to Deposit
Ratio [LDR] per March 2013 at around 91.17% it was clear that liquidity among
the public was shrinking. Moreover with the stipulation of Minimum Mandatory
Giro [GWM] was quite sizable, i.e. 8% which must be placed by BI, so cleary
liquidity was tightening.
The signal of liquidity
condition was already visible when last May the Deposit Insurance Agency [LPS]
increased LPS rate for conventional banks by 25 bps to become 7.75%, slightly
above BI rate which was 7.5% LPS saw that movement of deposit interest was and
aggressive and massive, While the amount of fund of the low strata people which
must be protected was growing in amount.
For information, the
maximum amount guaranteed by LPS was Rp 2 billion per account per person. They
were in fact the ones who were LPS target for protection. Considering that the average
deposit interest with maximum deposit of Rp 2 billion was growing. LPS took
unusual measure, i.e. to increase LPS from 7.5 % to 7.75 % so it was some sort
of preemptive policy of LPS just in case.
At certain point the
competition to fight for DPK would reach its peak which led to interest war a
condition which was indeed not desirable. So one of the options to cool down
competition which tend to be unhealthy was when BI dared to lower GWM ratio
from the present 8% to 6%. By this way, liquidity in banks would be eased and
would automatically ease the tension in compering to grab public fund.
Why did BI have to adopt
the policy and not OJK ? Because the stipulation on GWM ratio was still in BI’s
authority - so hopefully BI could understand the situation and condition faced
by the banking sector today which were feeling more and more difficult to
harness public fund. Easing of liquidity through lowering of GWM ratio was
among the many options to be taken by BI. (SS)
Business News - June 13, 2014
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