- Lower global volatilities may have enabled the government to assume more risk in its fiscal management, as reflected in the plan to transfer up to IDR 200 Tn of the government’s cash reserves into commercial banks’ accounts.
- Rather than liquidity support, the higher deposit rate on the government’s cash deposits should encourage banks to expand their credit portfolio.
- Challenges to the policy include subdued loan demand and banks’ cautious lending stance, which could weigh on margins as lenders engage in rate competition to attract creditors.
