The Challenge in Lowering Lending Rates

The prime lending rates (SBDK) at state-owned banks have finally dropped after Bank Indonesia (BI) said banks had been slow in lowering their lending rates. However, prime lending rates are not the same as the lending interest rates charged to customers. Why have banks been so slow in reducing their lending rates? How can they cut the interest rates?

State-owned banks’ prime lending rates, which have begun to decline, include those charged on corporate loans, retail loans, micro loans, consumption loans in the form of mortgage loans (KPR), and non-KPR loans. State-owned Bank Tabungan Negara (BTN) became the champion in lowering the prime lending rate for corporate loans. The bank cut the rate by 3 percentage points to 8 percent as of February, 2021 from 11 percent as of February 2020. Other state-owned banks, Bank Rakyat Indonesia (BRI), Bank Mandiri and Bank Negara Indonesia (BNII) only cut their prime lending rates by 1.95 percentage points during the same period.