Indonesian Banking Sector Remains Resilient Amid Global Volatility, OJK Says
Key Takeaways
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JAKARTA, Investortrust.id — Head of Banking Supervision at the Financial Services Authority Dian Ediana Rae said on Sunday, Aug. 24, 2025, that Indonesia’s banking sector has remained resilient despite economic and political turbulence across global markets. He emphasized that the industry’s performance is projected to stay stable even with moderated credit growth in line with the economic cycle.
In July 2025, bank lending grew 7.03% year on year, supported by healthy asset quality with non-performing loans at 2.28% and a decline in the loan-at-risk ratio to 9.68%. Investment credit rose sharply by 12.42% year on year, led by export-oriented sectors such as mining and plantations, along with transport, industry, and social services. These sectors were also key drivers of Indonesia’s second-quarter economic growth.
Third-party funds increased 7% year on year, strengthening liquidity positions. Liquidity ratios remained comfortably above regulatory thresholds, with the ratio of liquid assets to non-core deposits at 119.43% and liquid assets to third-party funds at 27.08%. These figures demonstrated ample buffers and sound capitalization. As of June 2025, the capital adequacy ratio stood at a robust 25.81%, indicating banks’ ability to absorb potential risks amid volatile global conditions.
Head of Banking Supervision OJK Dian Ediana Rae, accompanied by OJK Spokesperson Sekar Putih Djarot, speaks with the media in Bandung, Saturday, Aug. 2, 2025. (Hari Gunarto)
Lending Rates Ease
Following Bank Indonesia’s rate cuts, bank lending rates also declined. In July 2025, the weighted average rupiah lending rate dropped by seven basis points compared with the previous year, particularly in productive loans. Lending rates are expected to continue falling throughout the year, though the extent depends on each bank’s cost of funds. Banks that rely heavily on expensive time deposits may face limited room to cut rates further, underscoring the importance of raising low-cost deposits.
The OJK urged banks to adjust rates gradually to align with market conditions while maintaining transparency and consumer protection. Authorities also warned against unhealthy competition in setting rates. Revised business plans in the first half of 2025 reflected more conservative targets, as banks responded to shifting macroeconomic conditions and external risks.
Despite the adjustment, OJK projected stable performance through 2025, with banks expected to remain cautious in higher-risk segments while expanding credit to productive sectors of the economy.
Optimism Strengthens
The OJK’s Banking Business Orientation Survey for the third quarter of 2025 showed optimism across the industry. Banks anticipated stronger domestic macroeconomic conditions, credit expansion, and deposit growth, translating into higher profitability and capitalization. The survey also indicated expectations of stronger inflows from corporate customers and government deposits into regional banks.
Optimism was reinforced by Bank Indonesia’s policy easing in May and July, when the central bank lowered its benchmark rate to 5.25% before cutting again to 5.0% on Aug. 20. These moves reduced funding costs and created room for increased loan demand.
The regulator called on banks to adopt adaptive strategies to withstand macroeconomic shifts and contribute to broader economic recovery. The OJK stressed that it will continue to monitor risks and coordinate with the Financial System Stability Committee (KSSK) to safeguard confidence and stability in the sector.
Global Outlook Improves
In the first half of 2025, the global economy was pressured by trade wars, new tariffs from the United States, and geopolitical tensions in the Middle East. These factors weighed on international trade and slowed global growth, including in Indonesia.
Conditions improved in the second half of the year as the US and trade partners agreed to reduce tariffs, including a cut to 19% for Indonesian exports, and geopolitical frictions eased. The International Monetary Fund subsequently revised its global growth forecast upward to 3% in 2025 and 3.1% in 2026, from earlier projections of 2.8% and 3%. Indonesia’s own growth forecast was lifted to 4.8% for 2025–2026.
Indonesia’s economy expanded 5.12% year on year in the second quarter of 2025, beating expectations. Manufacturing remained in contraction with a PMI reading of 49.20, but conditions improved from 46.90 in the previous month. Consumer confidence stayed upbeat at 118.1, while the trade surplus and foreign reserves provided additional buffers.
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