Banks would likely raise their lending rates this year."Jakarta (ANTARA News) - Bank Indonesia (BI) said banks in Indonesia are expected to raise their lending rates this year after maintaining relatively low rates last year despite the increase in Bank Indonesia benchmark interest rate (BI rate).
"Banks would likely raise their lending rates this year," BI Governor Agus Martowardojo said in a seminar here on Wednesday night.
Agus said in the second half of 2013, BI raised its BI rate by 175 basis points and banks responded with a 300 basis point increase in deposit rates.
However, banks raised their lending rates only by 40 basis points which meant a cut in their net interest margin, he said.
This year, however, bank would most likely raise their lending rates, he said, adding borrowers, therefore, should be be more efficient in using loans, he said.
Competition in collecting third party funds in 2014 is also expected to be tight among banks, he said.
BI, therefore, advised banks to set a moderate credit growth target at around 15-17 percent this year, he said.
It would be easier for big banks to attract deposits , but small lenders would be in difficulty in the competition, he said.
He said the decision of BI to raise BI rate by 175 basis points in 2013 was to prevent current account deficit from widening to maintain the countrys financial stability.
"Other countries like Turkey , South Africa, Argentina and Venezuela even raised their benchmark interest rates by 400-500 basis points," he said.
"We fared better . We were lucky that we were not like those countries that have to raise their interest rates as they had lost confidence," he said.
(Uu.H-ASG/A014)
Editor: Priyambodo RH
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