Banking Report Card for Prabowo’s First Year in Office: Credit Still Stagnant

By Paul Sutaryono, Banking Observer, Assistant Vice President of BNI (2005-2009), Expert Staff at the Center for Business Studies (PSB), UPDM, Jakarta and Advisor to the Indonesian Center for Sustainable Tourism (PPBI), Unika Atma Jaya Jakarta.

On October 20, 2025, it will be exactly one year since President Prabowo Subianto and Vice President Gibran Rakabuming Raka took office in Indonesia. How has Prabowo-Gibran performed in the banking industry?

Looking at their performance from a monetary perspective, it appears quite encouraging. The rupiah exchange rate has been maintained at around IDR 16,500 per US dollar. Bank Indonesia (BI), as the guardian of monetary stability, continues to intervene in the financial market.

Not only the rupiah exchange rate, but inflation is also under control at 2.65 percent at the end of September 2025. There was an increase from 2.31 percent at the end of August 2025, but it is still below the inflation target of 2.5 percent plus or minus 1 percent.

On the other hand, foreign exchange reserves amounted to USD147.8 billion as of September 2025, down from USD150.7 billion a month earlier. The decline is in line with BI’s intervention in the financial market to control the rupiah exchange rate.

How is fiscal performance? Fiscal conditions are not very satisfactory. The Ministry of Finance recorded a state budget deficit of Rp371.5 trillion or 1.56 percent of gross domestic product (GDP) as of September 2025.

Meanwhile, state spending realization only reached 62.8 percent in the third quarter of 2025. Several ministries/agencies recorded low budget absorption, such as the National Nutrition Agency at 16.9 percent, the Ministry of Agriculture at 32.8 percent, and the Ministry of Public Works and Public Housing at 48.2 percent.

In essence, budget absorption performance appears to be low. In fact, government spending should be a driving factor for economic growth.

Banking Industry Performance

So, how is the performance of the banking industry under Prabowo’s administration? Let’s take a look and see!

First, let’s look at the performance of commercial banks up to September 2025. Banking credit is still growing positively from 7.03 percent (year on year/yoy) in July 2025 to 7.56 percent in August 2025. This figure is far below last year’s credit growth of 11.4 percent (as of August 2024).

Fortunately, credit growth is getting better. As of September 2025, the growth reached 7.70 percent. Unfortunately, this figure is still below the growth in September 2024 of 10.85 percent.

Second, the new Minister of Finance, Purbaya Yudhi Sadewa, made a breakthrough by injecting Rp200 trillion in fresh funds into four state-owned banks: Bank Mandiri, BRI, BNI, each receiving Rp55 trillion, and BTN receiving Rp25 trillion. Meanwhile, Bank Syariah Indonesia (BSI) received an injection of Rp10 trillion on September 12, 2025.

The fresh funds came from the budget surplus (SAL) that had been stored at BI. The injection was ultimately aimed at boosting economic growth.

The deposits at the banks were considered call deposits with 4 percent interest. The recipient banks are prohibited from using the funds to purchase Government Securities (SBN) and/or Bank Indonesia Rupiah Securities (SRBI).

Third, it turns out that the injection of fresh funds has sparked much debate and commentary from a number of experts. According to Makmur Keliat, an expert, there are three clusters of debate. First, the regulatory cluster. Second, the economic growth school of thought cluster. Third, the political economy cluster.

Regarding the first cluster, the question that arises is whether the transfer of funds is legal. Some say it is not in line with the law. Others say that the transfer is in accordance with regulatory provisions.

For the second cluster, namely the debate on the economic growth school of thought, there is a view that in difficult situations such as now, when national economic growth is experiencing a decline or recession, the government must intervene more. This can be done by injecting more liquidity into the community.

Meanwhile, in the third cluster, which is related to political economy, those who adhere to this approach argue that economic decisions do not exist in a political vacuum. They suspect that there may currently be a shift in the network of rent financialization. This term refers to the existence of an ecosystem of financial business entities and investors.

This network has generated profits, but at the expense of the community or society. This network is said to have received incentives in the form of easy access to funds from BI’s fund placement sources (Kompas, September 25, 2025).

The second cluster states that the government must intervene more significantly by injecting more liquidity into the community. This view is similar to that of Thomas F. Huertas in his book, Crisis: Cause, Containment and Cure (2011).

Huertas states that to arrest the economic decline, governments agreed to support systemically important financial institutions (page 115). To halt the economic decline, governments agreed to support systemically important financial institutions.

Considering that Purbaya is an electrical engineering graduate, it is not surprising that he views economic phenomena from an “exact” perspective, using data as the basis for movement—just as objects move only because of force.

In the history of economic thought, this approach is often referred to as “Newtonian economics,” which emphasizes equilibrium with mechanical analogies. However, in the modern era, a new term has emerged: “econophysics.”

Econophysics is the modeling of economic phenomena, especially in situations of uncertainty, fluctuation, and nonlinear dynamics, using statistical physics and complexity physics theories. The goal is to understand economic processes by viewing them as physical systems.

The laws of physics are used to explain phenomena such as price fluctuations, stocks, wealth distribution, and market behavior. Data is considered to be moving particles that, when analyzed, reveal complex patterns.

In physics, motion is determined by force and mass. If the force is greater than the mass, acceleration is created. If the force is too small, objects tend to remain stationary due to the law of inertia.

Purbaya used this framework when he said that funds “deposited” at BI should be released to stimulate the economy. He proposed that around Rp200 trillion be transferred to banks.

The physics analogy is clear. Stagnant funds are a large mass that does not move. When there is a driving force—in the form of fiscal policy—the system moves (Yayat Syariful Hidayat, Investor Daily, October 6, 2025).

Fourth, why is there an injection of fresh funds? Is the banking sector currently experiencing a liquidity shortage (supply side)? No! This is reflected in the ratio of liquid assets to third-party funds (AL/DPK), which stood at 29.29 percent as of September 2025. In fact, it rose 7.49 percent from 27.25 percent in August 2025.

This ratio is well above the 10 percent threshold. This means that the current problem lies on the credit demand side, which is experiencing a drought.

The abundant liquidity is also implied by the increase in approved but undisbursed loans from IDR 2,372.11 trillion in August 2025 to IDR 2,374.8 trillion in September 2025. This data shows that banks have lost the opportunity to reap the benefits of interest income.

Such fresh funds will also flow to regional development banks (BPD). Bank Jakarta and Bank Jatim, for example, will receive fresh funds of Rp20 trillion and Rp10 trillion, respectively. This will be a tonic for BPD.

Fifth, remarkably, by early October 2025 (one month after the funds were injected), Bank Mandiri was able to absorb 74 percent (Rp40.70 trillion out of Rp55 trillion), BRI 62 percent (Rp34.10 trillion out of Rp55 trillion), and BNI 50 percent (Rp27.5 trillion out of Rp55 trillion). Then, BTN absorbed 19 percent (Rp4.75 trillion from Rp25 trillion) and BSI absorbed 55 percent (Rp5.50 trillion from Rp10 trillion) (Infobanknews.com, October 9, 2025).

BI targets credit growth in 2025 to reach 8 percent-11 percent. The Financial Services Authority (OJK) is more optimistic, targeting credit growth of 9 percent to 11 percent. Will banking credit growth at the end of 2025 reach the targets set by BI and OJK?

Furthermore, will the Rp200 trillion be able to drive credit growth to double digits by the end of 2025? Data shows that the disbursement of Rp8,075 trillion in credit resulted in credit growth of 7.56 percent as of August 2025. Therefore, Rp200 trillion will boost credit growth by a maximum of 1 percent.

Thus, it will be difficult for the credit ratio to reach double digits by the end of 2025. Why? Because there are only two months left and credit demand is still stagnant.

Sixth, on the other hand, the open unemployment rate was 4.76 percent (7.28 million people) as of February 2025. This is only a 0.06 percent decrease from 4.82 percent in February 2024 (BPS).

Therefore, banks should channel credit to sectors that are able to absorb a large workforce and are labor-intensive. For example, the manufacturing, electricity, gas and water, construction, mining, tourism, and creative economy sectors.

Seventh, banks can also channel credit to the MSME sector. This is because MSMEs are capable of absorbing more than 100 million workers. Credit can also flow to 80,000 Merah Putih Village Cooperatives with Village Fund guarantees.

Risk Mitigation Measures

Eighth, banks must continue to improve credit quality in order to keep the ratio of non-performing loans (NPLs) under control. Currently, the NPL ratio stands at 2.08 percent as of August 2025, well below the safe threshold of 5 percent. In essence, banks must implement governance, risk management, and compliance (GRC). This is non-negotiable!

Therefore, the government’s fiscal policy must focus on creating job opportunities. Plus various strategies to boost people’s purchasing power. When job opportunities become more abundant, people’s purchasing power will increase. As a result, household consumption will be higher to fuel economic growth!