INDONIA Takes Effect, BI Prepares OIS Market and BI-FRN
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JAKARTA, Investortrust.id — Bank Indonesia, the country central bank, implements the Indonesia Overnight Index Average, or INDONIA, as the new reference rate for the interbank money market on Wednesday, Jan 7, 2026 in Jakarta to replace JIBOR and strengthen benchmark credibility through transaction-based pricing, a move expected to deepen rupiah financial markets. The central bank simultaneously prepares an overnight index swap market and floating-rate instruments to support forward-looking rate formation and hedging.
Following INDONIA’s launch, existing tenors now use compounded INDONIA, calculated as a compounded average of overnight rates over a defined period.
“So it is a compounded average of INDONIA rates over a certain period,” said Arief Rachman, Director of the Financial Market Development Department at Bank Indonesia, on Wednesday.
INDONIA is derived from actual overnight interbank transactions across all conventional banks, making the compounded rate backward-looking and based on historical data.
The compounded benchmarks are calculated over 30-day, 60-day, 180-day, and 360-day periods, forming an INDONIA Index intended to serve as a reference for market participants.
Looking ahead to 2028, the central bank plans to introduce an Overnight Index Swap, or OIS, enabling the exchange of floating overnight rates with fixed rates.
Through a matching process operated by an institution appointed by the central bank, the OIS market is expected to generate a forward-looking reference rate based on INDONIA.
To support this development, Bank Indonesia issued BI Floating Rate Notes, or BI-FRN, in November 2025 as a new rupiah-denominated instrument.
“Like Bank Indonesia Rupiah Securities, BI-FRN has a coupon, but the interest rate is floating, while SRBI is discounted,” Arief said.
With a one-year tenor, BI-FRN coupons adjust daily in line with INDONIA and are expected to function as an interest-rate hedge should policy rates decline.
“The objective is to develop the OIS market, because Indonesia has not previously had a floating-rate financial market instrument,” he said.
Bank Indonesia formally discontinued the Jakarta Interbank Offered Rate, or JIBOR, on Jan 1, 2026, replacing it with INDONIA as the benchmark for rupiah money-market transactions.
The shift aligns Indonesia with G20 standards and Financial Stability Board recommendations following global reforms triggered by manipulation scandals involving LIBOR.
“If compared with other countries, we are neither too far ahead nor too far behind,” Arief said during a media briefing in Jakarta.
The United States adopted the Secured Overnight Financing Rate in June 2023, while the European Union began using the Euro Short-Term Rate in 2022.
In Asia, Japan implemented the Tokyo Overnight Average Rate in December 2021, Singapore adopted the Singapore Overnight Rate Average in December 2024, and the Philippines introduced the Overnight Reference Rate in June 2023.
Arief said INDONIA had been gradually used alongside JIBOR since 2018 as part of efforts to deepen the money market.
“INDONIA uses transaction rates, not offered rates, so the prices are real and cannot be manipulated,” he said.
Since taking effect on Jan 2, 2026, INDONIA rates have declined, falling from 4.12578 percent at the end of 2025 to 3.84926 percent as of Wednesday.
“INDONIA does not signal whether policy rates will go up or down. It is purely the price formed in the market,” Arief said.
The decline reflected ample liquidity conditions and market expectations rather than a shift in monetary policy stance, he added.
Outstanding exposure linked to JIBOR has also fallen, from Rp 548.72 trillion, equal to $34.2 billion, in the first quarter of 2025 to Rp 480.19 trillion, equal to $29.9 billion, in the third quarter, signaling market adjustment to INDONIA’s full implementation.