Jakarta (ANTARA News) - Bank Indonesia (BI) has set a new regulation of minimum reserve requirements based on loan-to-deposit ratio (LDR) with the lower limit of 78 percent and upper limit of 100 percent to boost credit growth under prudent principle.

"Banks that have LDR outside the target range will be subject to disincentives based on the difference between the LDR and the target range. If banks` LDR exceeds the target range with adequate capital they will deserve incentives," Bank Indonesia Governor Darmin Nasution said on Friday.

The decision would come into force as from March 1, 2011 to give banks a chance to meet the target range, he said.

"The decision is based on the tendency of the domestic economy, marked by a faster increase in the demand side than in the supply side," he said.

He made it clear strong domestic demand was particularly related to household consumption, while the role of investment started to increase but had not yet been optimum to support improvement in the supply side.

"The high domestic demand has boosted imports to increase rapidly," he said.

He said the strong domestic demand came amidst the slow global economic recovery marked by economic slowdown in China and a number of developed nations such as the United States and Japan. Meanwhile, in general, the economic prospects of emerging nations particularly those in Asia still recorded improvement.(*)

Editor: Jafar M Sidik
COPYRIGHT © 2012

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