Too Many Banks in Indonesia, OJK Pushes Consolidation to Strengthen Economic Growth
Key Takeaways
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JAKARTA, Investortrust.id — The Financial Services Authority has said that the number of commercial banks in Indonesia, currently at 105, remains excessive and must be streamlined to give the sector greater strength to drive economic growth.
Chief Executive of Banking Supervision Dian Ediana Rae made the statement on Tuesday, Sept. 9, 2025, at the Digital Banking Awards 2025 organized by Intellectual Business Community and Investortrust at the JW Marriott Hotel Jakarta.
“Having 105 banks is still too many for the structure of our economy. Bank directors, executives, and shareholders should really pay attention to this,” Dian said.
He explained that in the long run the industry should be consolidated through mergers, acquisitions, and other measures, allowing a leaner structure to contribute more effectively to the economy.
Citing economist Frederic S. Mishkin, Dian emphasized that a country’s economic growth depends heavily on a well-functioning financial system, particularly banking, which remains Indonesia’s primary economic driver.
Banking Still Dominates the Financial Sector
Dian underlined that banks still control about 80 percent of Indonesia’s financial market share, making their performance decisive for achieving the government’s vision of Indonesia Emas 2045, a strategy for becoming a high-income nation by mid-century.
“Indonesia Emas 2045 will be determined by how we transform the structure of our national banking sector,” he said.
He added that the number of rural banks, which currently stands at about 1,500, would also need to be reduced over time to ensure the sector has greater “firepower” to accelerate economic growth.
“Without consolidation, it will be difficult for us to catch up with other countries. Competition will increasingly depend on the experience and application of advanced technology,” Dian noted.
Push for Digital Transformation
Dian also reaffirmed that OJK will accelerate banking digitalization through supportive regulations and policies. A key instrument is the Indonesian Banking Development Roadmap 2020–2025 (RP2I), which serves as the sector’s strategic guide for strengthening business models, regulatory oversight, and licensing systems.
“OJK places digitalization as one of the pillars of RP2I. This pillar focuses on providing digital products and services that meet public expectations, using emerging technologies in collaboration with IT service providers and other stakeholders,” Dian said.
He stressed that the adoption of digital solutions must be accompanied by strong governance and adequate IT risk management.
Stable Despite Credit Slowdown
Dian highlighted that the Indonesian banking sector has remained resilient amid global and domestic economic and political uncertainty. He noted that a slight slowdown in loan growth was part of the natural business cycle.
“In times of high demand, banks will extend more credit, while in periods of slowing demand, they will adjust,” he explained.
Bank lending grew 7.03 percent year-on-year to Rp 8,043.2 trillion in July 2025, slower than June’s 7.77 percent growth. Meanwhile, third-party funds grew 7 percent year-on-year to around Rp 9,000 trillion.
“These are significant figures, and overall they show that banking liquidity remains strong,” Dian concluded.
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