Indonesian Bank Credit Surges 12.67% as New Lending Accelerates

JAKARTA, Investortrust.id — The intermediation function of Indonesia’s banking sector demonstrated strong resilience in the second quarter of 2026. Total bank lending grew 12.67% year-on-year (YoY), buoyed by a sharp surge in new credit distribution across almost all economic segments and sectors.

However, the banking industry is beginning to face headwinds, including slowing third-party fund (DPK) growth, a rising loan-to-deposit ratio (LDR), narrowing net interest margins (NIM), and mounting liquidity pressure.

During the same period, new bank lending accelerated significantly. The Weighted Net Balance (SBT) for new credit distribution surged to 93.1% in Q2 2026, up sharply from 38.7% in Q1 2026 and well above figures recorded during the same period last year. This rebound shows that bank intermediation is strengthening despite domestic and global economic challenges.

These findings were revealed in the Regular Economic Update: Bank Indonesia Banking Survey Report Q2-2026, compiled by the Office of Chief Economist (OCE) Group at PT Bank Rakyat Indonesia (Persero) Tbk (BRI) alongside its Macroeconomics & Financial Market Analytics Department, published in Jakarta on Thursday, July 23, 2026. The report utilizes data from the Financial Services Authority (OJK) and Bank Indonesia’s Banking Survey.

According to OJK data, bank credit growth reached 12.67% YoY through the second quarter of 2026. Meanwhile, deposit growth remained in double digits at 11.16%, though it decelerated compared to the previous quarter. This pushed the industry LDR up to 88.32%, indicating that credit expansion is outpacing deposit collection.

In terms of asset quality, gross non-performing loans (NPL) remained well-managed at 2.17%, despite a slight uptick from the start of the year. Profitability came under pressure, with NIM narrowing to 4.36%. Capitalization remained robust, with the capital adequacy ratio (CAR) standing at 23.74%—well above regulatory minimums, though trending downward.

Understanding the 93.1% Weighted Net Balance (SBT)

Bank Indonesia's Banking Survey points to strengthening optimism in credit distribution, as reflected in the SBT jump to 93.1% from 38.7% in the previous quarter.

OCE BRI clarified that the 93.1% figure is a survey indicator reflecting lending momentum based on responses from surveyed banks, rather than a nominal year-on-year growth rate. The SBT is calculated from the weighted difference between banks reporting an increase in credit distribution and those reporting a decrease.

A higher SBT value indicates a larger proportion of banks experiencing increased new lending. Therefore, an SBT of 93.1% demonstrates that an overwhelming majority of surveyed banks increased new credit issuance compared to the prior quarter. Actual nominal credit expansion continues to be tracked by OJK data, which logged 12.67% YoY growth through Q2 2026.

Bank Indonesia uses the SBT indicator to capture shifts in lending behavior earlier than actual realization statistics. Consequently, the SBT serves as a leading indicator to forecast credit trends for upcoming periods.

Productive Credit Drives Commercial Growth

According to OCE BRI, the surge in new lending was observed across all loan categories. Working Capital Credit (KMK) recorded the highest SBT, while Investment Credit (KI) saw the strongest increase, nearly catching up to working capital demands. This shift indicates that corporate financing is moving beyond day-to-day operational needs toward capacity expansion and new capital investments.

Consumer lending also experienced a solid recovery. Although consumer credit SBT remained below productive loans, its YoY growth was the highest among all categories, signaling a pickup in household borrowing.

By economic sector, credit expanded in eight out of 13 business sectors. Construction posted the largest increase, followed by transportation and info-communications, education, and real estate. Conversely, lending to manufacturing, trade, mining, and financial services decelerated, though all four sectors remained in expansion territory.

Non-Subsidized MSME Loans Surge

By debtor category, the most noticeable acceleration occurred in non-subsidized micro, small, and medium enterprise (MSME) loans, followed by non-MSME corporate borrowers. This reveals that commercial bank financing for small businesses is growing faster than government-subsidized credit schemes (KUR).

While corporate loans remain the primary contributor to national credit growth, the growth gap between large enterprises and MSMEs is narrowing, reflecting a recovery in small and medium-scale business activity.

The survey also highlighted increased financing for trade activities. Import credit expanded faster than export credit, reflecting higher demand for raw material financing and international trade, even as foreign exchange risks require ongoing vigilance.

In the retail segment, nearly all consumer loan types accelerated. Automotive Loans (KKB) posted the largest surge, followed by Multipurpose Loans (KMG) and Mortgages (KPR/KPA). Mortgages retained the highest overall SBT level among consumer products.

In contrast, credit card usage slowed sharply. OCE BRI attributes this trend to shifting consumer preferences, with borrowers favoring structured installment plans over revolving credit lines.

Deposit Growth Slows Amid Investment Competition

On the funding side, OCE BRI expects overall deposit collection to grow in Q3 2026, though momentum is slowing. The deceleration is primarily driven by fixed time deposits, whereas savings accounts saw stronger growth and served as the main anchor for fund collection.

OCE BRI noted that high yields on Bank Indonesia Rupiah Securities (SRBI) and Indonesian Government Bonds (SBN) have prompted depositors to shift funds away from commercial time deposits into higher-yielding debt instruments. As a result, competition for term deposits is expected to intensify, requiring banks to be more selective with deposit rates while strengthening client retention strategies.

Liquidity Pressures Reach Multi-Year Highs

The report warns of escalating national liquidity pressures. The Liquidity Early Warning System (EWS) Index reached 2.18 on July 17, 2026—the highest reading recorded since monitoring began in 2017—placing it firmly inside the "very tight" zone.

Statistical Granger Causality tests show that the EWS index serves as an early indicator that leads deposit growth slowdowns by three to six months. If liquidity pressures persist, bank cost of funds (CoF) could rise, squeezing industry margins and profitability.

Credit Outlook Normalizes for 2026

Despite current strength, OCE BRI projects that new credit distribution will normalize in Q3 2026. The SBT index is forecasted to moderate to 84.7%—remaining in expansionary territory, but below Q2 peaks.

Expected full-year 2026 credit growth has been revised downward to 7.51%, reflecting a more selective stance among lenders to safeguard asset quality amid economic uncertainty.

On the monetary policy front, OCE BRI forecasts that Bank Indonesia may raise the benchmark BI-Rate by 25 basis points to 6.00% by the end of 2026 to support rupiah stability. Inflation is projected to rise moderately while remaining within Bank Indonesia’s target corridor.

Five Strategic Recommendations from OCE BRI

Based on the survey findings, the Office of Chief Economist (OCE) BRI outlined five strategic recommendations to help Indonesia’s banking sector navigate upcoming headwinds and maintain balance sheet stability.

To protect overall asset quality, banks must first focus on selective credit expansion by prioritizing productive economic sectors, borrowers with healthy cash flows, and appropriately structured financing tenors. In tandem, financial institutions need to strengthen liquidity management by building low-cost CASA deposits, retaining core deposite bases, and exercising discipline over deposit pricing as competition for market liquidity intensifies.

To safeguard profitability, lenders should actively manage funding costs to mitigate net interest margin (NIM) compression, particularly as cost of funds threatens to outpace loan yields. Furthermore, enhancing risk management frameworks remains essential as loan-to-deposit ratios (LDR) rise and capital adequacy ratios (CAR) decline, ensuring credit risks are kept in check for sustainable long-term growth.

Finally, banks ought to leverage the Liquidity Early Warning System (EWS) indicator as a proactive detection tool, allowing management teams to anticipate funding pressures three to six months in advance and execute timely risk mitigation strategies before market liquidity tightens further.