Why Indonesia’s Deposit Rates Are Defying the Central Bank’s Aggressive Rate Hikes

JAKARTA, Investortrust.id — Indonesia’s monetary landscape is witnessing a curious disconnect. Despite Bank Indonesia’s (BI) aggressive tightening cycle—which has pushed the benchmark BI Rate up by 100 basis points to 5.75% so far in 2026—the country’s largest banks have kept deposit yields largely unchanged, holding steady in the 2.25% to 3.25% range.

For investors and depositors, the central bank’s benchmark is no longer the sole primary driver of retail interest rates. The banking sector has instead pivoted toward the Indonesia Deposit Insurance Corporation’s (LPS) deposit insurance rate (TBP)—the maximum interest rate covered by the state deposit insurance scheme. Currently anchored at 3.50%, this figure serves as the de facto ceiling for major banks, who are avoiding higher deposit costs to protect their net interest margins (NIM).

"The banking industry's current reference point is the LPS rate, which has not moved all year," a senior banker told Investortrust on Monday (6/22/2026). As long as this guaranteed rate remains static, banks see little incentive to increase deposit yields, as doing so would immediately inflate their cost of funds without a guaranteed competitive advantage.

Liquidity Remains the Anchor

While standard economic theory suggests that central bank hikes should trigger an immediate rise in retail interest rates, the transmission mechanism is currently muted by structural liquidity. Bank Indonesia’s focus on stabilizing the Rupiah and controlling inflation has been augmented by non-rate instruments, such as foreign exchange interventions and the issuance of Bank Indonesia Rupiah Securities (SRBI).

Furthermore, the banking system remains flush with liquidity. To ensure this continues, the central bank has even loosened macroprudential requirements, such as raising the Foreign Funding Ratio (RPLN) for banks to 40% starting next month. By maintaining this comfortable liquidity cushion, lenders are under no pressure to engage in a "deposit war" to attract customer capital.

Managing the Credit Dilemma

The government is also actively managing this transition to ensure that higher central bank rates do not cripple the real economy. Authorities are pressuring state-owned lenders, known as the Himbara group, to keep credit affordable to support the country’s 4.9% to 5.7% growth target for 2026.

Banks now face a strategic balancing act. They must respond to the central bank's tightening cycle, yet they are equally determined to avoid a spike in lending rates that could stifle business growth and household consumption.

For now, the signals from the industry are clear: banks are prioritizing stability over rapid yield adjustments. For retail depositors, the "BI Rate" is no longer the definitive indicator of what they will earn. Instead, the real influence rests with the LPS and the broader liquidity conditions within the national banking system. If the LPS chooses to hold its 3.50% guarantee, savers should not expect significant relief on deposit returns in the near term.