The Indonesian banking sector is displaying notable resilience amid ongoing global economic and political uncertainties, according to Dian Ediana Rae, Chief Executive of the Financial Services Authority of Indonesia (OJK). This assurance comes despite signs of a slowdown in credit growth, indicative of the broader economic cycle.
In July 2025, bank credit in Indonesia grew robustly at 7.03% year-over-year, bolstered by quality asset management, which has kept the non-performing loans (NPL) ratio stable at 2.28%. Furthermore, the Loan at Risk (LaR) has improved, showing a decrease to 9.68%. Investment credit has also seen an impressive growth of 12.42%, primarily flowing into export-driven sectors like mining, plantations, transportation, and social services. This growth underscores the bank sector’s alignment with ongoing economic expansions in the second quarter of 2025.
A significant contributor to the stability of the banking sector is the increase in Third Party Funds (DPK), which rose by 7% year-over-year. This growth is vital for maintaining liquidity in banks. The current liquidity condition appears well-managed, aided by strong capital positions—evidenced by an Adequate Capital Ratio (CAR) of 25.81%. This indicates that banks are prepared to face potential risks that may arise in volatile economic climates.
Despite ongoing global uncertainties, the provisions for banking performance appear promising. OJK forecasts a slightly moderated credit growth rate, as banks adopt more cautious approaches to lending, especially concerning high-risk segments. However, there remains a focus on expansion in economically viable sectors.
The OJK’s Banking Business Orientation Survey (SBPO) for the third quarter of 2025 reflects a prevailing optimism among commercial banks. This sense of assurance is largely attributed to expectations for improved domestic macroeconomic conditions and the banks’ aptitude in risk management. Additionally, the anticipated growth in DPK and lending is expected to significantly enhance bank profits and capital.
The reduction in Bank Indonesia’s interest rate to 5.25% in both May and July 2025 has further decreased credit costs, potentially boosting loan demands from debtors. In terms of raising funds, the focus is on strengthening funding sources through increased contributions from corporate clients and improving low-cost funding mechanisms. The likelihood of central government funds flowing to local banks further supports this outlook.
The OJK has emphasized the necessity for banks to adopt adaptive and innovative strategies to navigate various macroeconomic changes effectively. This proactive approach is crucial not only for maintaining financial system stability but also for propelling economic activity and ensuring ongoing support for a sustainable recovery and growth trajectory.
OJK remains vigilant in monitoring potential disruptions that may affect bank performance, aiming to maintain stability within the banking system and public trust. Through coordinated efforts with relevant institutions and ministries, the OJK aims to increase the banking sector’s contribution to the Indonesian economy.
In sum, the Indonesian banking sector’s current performance reflects a combination of robust credit growth, strong liquidity, and proactive governance. Despite the challenges posed by the global economic environment, the sector is equipped to handle potential disruptions while supporting the nation’s economic vitality. This resilience is built on cautious credit disbursement strategies, a commitment to risk management, and a focus on sectors poised for growth, presenting a positive outlook for the coming quarters.
### Conclusion
Overall, the robust health of the Indonesian banking sector amidst global challenges is a positive sign for both investors and consumers. The sector’s focus on quality and sustainability will be key to its enduring strength, positioning it as a pillar for national economic growth. The OJK’s strategic oversight and proactive measures ensure that banks can navigate uncertainties while contributing to the overall stability and recovery of Indonesia’s economy.
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