According to LPS, the move is aimed at boosting economic recovery.
“The deposit insurance rate will be valid from November 25, 2020 to January 29, 2021,” LPS chief commissioner Purbaya Yudhi Sadewa said at an online press conference here on Tuesday.
LPS has also lowered the deposit insurance rate by 25 basis points for foreign currency-denominated savings at commercial banks to 1 percent from 1.25 percent.
The decision to cut the deposit insurance rate was made after the LPS held a meeting of its board of commissioners on November 23, 2020.
LPS has taken several indicators into account while making the decision to cut the deposit insurance rate, including the downward trend in the deposit rate, which is expected to continue, along with the decision of Bank Indonesia (BI) to slash its benchmark interest rate, Sadewa said.
In addition, the prospect for banking liquidity remains stable as indicated by third-party fund placement, which grew 12.88 percent year-on-year in September, 2020, he added.
Meanwhile, credit growth needs to be encouraged after falling to 0.12 percent year-on-year in September, 2020 as a result of the COVID-19 pandemic, he noted.
"The other thing is that the stability of the financial system is under control," he said.
The fact that liquidity pressure on small banks and the competition among banks for liquidity funds has eased has also been one of LPS's considerations in slashing the deposit insurance rate, he added. (INE)
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