Background. On 5 November, SOE banks raised the time deposit counter rate to 4% in a well-coordinated fashion from the previous 1 2%, implying a 200 300bp increase. Theoretically it aims to attract more dollar funding into the banks. The plan was delayed by about a month since it was first announced by SOE banks on 25 September. In September, Dollar deposits expanded by 6.4% y-o-y from -0.8% in August, implying total Dollar third-party fund growth of 9.6% from 5.3% and LDR of 80% from 79% (Exhibit 1).<\/p>\n\n\n\n
More limited overall increase. While the counter rate increase was significant, the actual impact on the overall rate should be more limited, at least in the first round. The blended time deposit rate of SOE banks in September was already at 3.5% (weighted average across tenors) vs 3.7% previously, continuing its downward trend (Exhibit 2). Given the blended counter rate of 2% among SOE banks in September, this implies a special rate of 4.2% by our estimate. The increase to a 4% counter rate-assuming the special rate remains unchanged-would imply a blended rate increase of 40bp to 3.9%.<\/p>\n\n\n\n
Spread compression intensifies. The spread between Rupiah and Dollar TD rates has been compressed since 2014, reaching only 108bp in September. This partly reflects structural changes in food inflation which have consistently declined. Post-COVID, the widespread global rate increases pushed Dollar TD rates up faster, compressing the spread further. The Rupiah TD rates in SOE banks have also been on a downward trend since June, following BI s pivot in September 2024. BI has cut a total of 150bp since then, but transmission has slowed, resulting in only a 40bp drop in the blended TD rate (vs 32bp for all banks Rupiah TD). TD rates dropped more sharply in September following the MOF s excess cash placement in SOE banks totaling IDR200tn (see Policy Watch: Government Excess Cash Balance Unlocking Initiative).<\/p>\n\n\n\n
Loans vs BI FX reserves. Dollar time deposits are likely to be channeled into Dollar loans and\/or ends up in BI s FX reserves via FX Open Market Operation placements. Banks currently offer an average Dollar loan rate of 5.8%, with Dollar loan growth picked up to 13.4% y-o-y in September from 11.1% in January due to improved demand. BI s main instruments currently offer an average return of 3.93%, including SVBI at 3.98%, Dollar TD at 3.95%, and Export proceeds TD at 3.85% (Exhibit 3). This suggests a negative spread relative to the 4% TD rate in SOE banks, but still a slightly positive spread from a blended-rate perspective.<\/p>\n\n\n\n
Attracting inflows. Rupiah has weakened by about 35% against the Dollar since 2014, partly reflecting the global strength of the Dollar (Exhibit 4). Efforts to strengthen the Rupiah have come and gone, including the mandatory placement of export proceeds and the issuance of SVBI with attractive rates compared with those in Singapore and Hong Kong. Higher TD rates in SOE banks could be seen as a follow-up effort to help strengthen the Rupiah, which has underperformed its peers this year (-3.7% ytd). Banks in Singapore currently offer an average TD rate of 3.3% with no tax, higher than the effective 3.1% offered by SOE banks after the 20% tax.<\/p>\n\n\n\n
Our view. The increase in Dollar TD rates will accelerate spread compression, particularly at a time when Rupiah TD rates continue to fall as BI rate transmission intensifies. While this makes placements in onshore dollar TDs more attractive, we believe the pressure on the Rupiah exchange rate would be limited. In the first round, the likely impact is a shift from Dollar savings to Dollar TDs. The shift from Rupiah deposits in onshore banks is likely limited and gradual, given the underlying instrument requirements for amounts larger than IDR100k. The risk is if this leads to widespread Dollar rate increases among banks.<\/p>","protected":false},"excerpt":{"rendered":"
Background. On 5 November, SOE banks raised the time deposit counter rate to 4% in a well-coordinated fashion from the […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[7],"tags":[],"class_list":["post-6235","post","type-post","status-publish","format-standard","hentry","category-market-research"],"_links":{"self":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts\/6235","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/comments?post=6235"}],"version-history":[{"count":1,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts\/6235\/revisions"}],"predecessor-version":[{"id":6236,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/posts\/6235\/revisions\/6236"}],"wp:attachment":[{"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/media?parent=6235"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/categories?post=6235"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/himdasun.or.id\/en\/wp-json\/wp\/v2\/tags?post=6235"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}