Indonesia’s financial regulator
projects stronger results for the banking industry in the second
half of 2025, underpinned by recent interest rate reductions and
prudent yet growth-oriented lending, according to the Financial
Services Authority (OJK), Indonesia Business Post
reports.

Findings from OJK’s Banking
Business Orientation Survey (SBPO) for the third quarter, published
on August 24, indicate that commercial lenders remain upbeat,
citing expectations of more stable domestic economic conditions and
contained risks.

“Shifts in the global economy and
domestic macro indicators are prompting banks to pursue a more
measured lending strategy aligned with their business plans.
However, Bank Indonesia’s recent rate cuts have provided positive
impetus,” OJK’s chief banking supervisor, Dian Ediana Rae, said in
a statement.

As of August 2025, the central
bank had lowered its policy rate by a cumulative 100 basis points
($1 equivalent in monetary policy terms, moving from 6% to 5%).
Average rupiah lending rates slipped by seven basis points
year-on-year in July, particularly for productive loans, offering
scope for greater credit distribution and profitability.

OJK noted that banks’ capacity to
reduce lending costs remains linked to their funding structure,
given their reliance on time deposits within third-party funds.
Still, deposit growth is expected to be sustained by corporate
inflows, initiatives to expand low-cost funding, and transfers of
central government deposits to regional banks in the third
quarter.

“Banks should reinforce funding
strategies, particularly by strengthening low-cost deposit bases,
in order to provide room for further rate adjustments,” Dian said.
OJK emphasised it will continue overseeing risks to maintain
financial stability, safeguard public confidence, and ensure the
sector supports broader economic activity.

In July 2025, total bank lending
grew 7.03% y/y, supported by healthy asset quality. Non-performing
loans stood at 2.28%, slightly higher than January’s 2.18%, while
loans at risk dropped to 9.68%, below pre-pandemic
levels.

Investment lending led the
expansion, rising 12.42% y/y, with strong demand from mining and
plantation sectors, as well as transport, manufacturing, and social
services. Deposits increased 7% in the same period, bolstering
liquidity positions.

Liquidity metrics remained well
above regulatory thresholds, with banks’ liquid assets-to-non-core
deposits ratio at 119.43% and liquid assets-to-third-party funds
ratio at 27.08%. Meanwhile, the capital adequacy ratio (CAR) stood
at 25.81% in June, highlighting the system’s resilience against
global headwinds.

“The figures reaffirm the
sector’s solid footing, supported by strong governance and careful
intermediation. Growth momentum is expected to continue, driven by
improved sentiment,” Dian said.

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