OJK Releases Transparency Rules for Commercial Bank Basic Credit Interest Rates

Jakarta – The Financial Services Authority (OJK) has officially issued OJK Regulation Number 13 of 2024 concerning Transparency and Publication of Basic Credit Interest Rates for Conventional Commercial Banks (POJK SBDK BUK).

Head of the Department of Literacy, Financial Inclusion and Communication of OJK Aman Santosa explained, the issuance of this POJK is one of the mandates of Article 8A of Law Number 7 of 1992 concerning Banking as last amended in Law Number 4 of 2023 concerning Development and Strengthening of the Financial Sector, namely the obligation of commercial banks to transmit interest rates (i.e. cost of funds, margins, and overhead costs).

“This is to encourage the efficiency of setting bank interest rates to support economic financing,” Aman said in his official statement quoted on August 27, 2024.

Then, what things are regulated in this POJK SBDK? First, this POJK regulates the SBDK as an indication of the lowest effective interest rate that reflects the Cost of Funds for Credit (HPDK), overhead costs, and margins, to be used as a reference in setting lending rates.

Second, this POJK SBDK BUK regulates a more informative SBDK publication format, namely by announcing each component of the SBDK (i.e. HPDK, overhead, and margin) and adding more detailed types of SBDK in the MSME sector (i.e. the publication of medium credit and small credit).

Third, in the preparation of the Prime Lending Rate, BUK should consider the benchmark interest rate from the competent authority and the development of economic conditions.

Fourth, this POJK is also intended for BUK to pay attention to aspects of protection to consumers in the form of notification of changes in interest rates and conversion of flat to effective in offering letters.

Fifth, this POJK regulates the submission of SBDK reports to OJK which are more detailed and validated with OJK-BI-LPS integrated reports, consisting of:

a. Cost of Funds for Credit (HPDK) which consists of, among others, third party fund costs (i.e. current accounts, savings, and deposits) and third party non-fund costs.

b. Overhead costs which include, among others, human resource costs at BUK, credit-related promotional costs, and asset depreciation.

c. The margin set by BUK in lending activities by considering the Return on Asset (ROA) target to be achieved according to the bank’s business plan after taking into account taxes to be paid by considering the going concern of BUK’s performance.

Sixth, this POJK SBDK BUK regulates the announcement to the public of any changes to the determination of SBDK.

Seventh, this OJK regulation also regulates the submission of a detailed SBDK report to OJK no later than the 15th for the position at the end of the previous month.

Eighth, POJK SBDK BUK also regulates sanctions for errors in the announcement of graded SBDK, including a maximum fine of IDR 15 billion.

Ninth, this POJK has certain authorities for OJK including adjustments to the SBDK and SBK based on certain considerations.

Tenth, this OJK regulation also regulates the announcement of the SBDK Publication Report and the submission of the SBDK Detail Report starting from the position of October 2024 data.

The issuance of POJK SBDK is expected to improve the governance of the calculation, announcement, and submission of SBDK in order to improve comparability, consumer education and protection, and monetary policy transmission. (*)