Business · Economy · 1 hr ago
Indonesia Cuts Bank Reserve Requirements to Add Liquidity
Bank Indonesia will lower reserve requirements for conventional and Islamic banks starting in November 2026.
The required share of deposits held in reserve will fall in two steps, with the final reductions taking effect on December 1.
Conventional banks’ rate will drop from 9% to 7%, while Islamic banks’ rate will fall from 7.5% to 5.5%.
The central bank says the cuts will add about Rp190 trillion in liquidity to the banking system.
The move comes as Indonesia faces pressure on the rupiah linked to a threat by index provider MSCI to downgrade the country.
The benchmark interest rate stayed unchanged, with the bank opting for reserve cuts and targeted support instead.
Bank Indonesia will also reduce some lending incentives from December, while keeping incentives for money-market development unchanged.
Bank Indonesia kept its benchmark interest rate unchanged and announced cuts to banks’ reserve requirements.
The central bank said the reserve cuts are intended to strengthen liquidity in the banking system.
For conventional banks, the reserve requirement will fall from 9% to 7%; for Islamic banks, it will fall from 7.5% to 5.5%.
The cuts will be phased in from November 1 to December 1, 2026.
Bank Indonesia is also relying on targeted measures to support the rupiah amid volatility linked to an MSCI downgrade threat.
- Who
- Bank Indonesia, Indonesia’s central bank.
- What
- It kept its benchmark interest rate unchanged and announced cuts to banks’ reserve requirements.
- When
- The decisions were announced on October 21, 2026. The reserve cuts take effect in stages on November 1 and December 1, 2026.
- Where
- Jakarta, Indonesia.
- Why
- The reserve cuts aim to strengthen liquidity across the banking system. Bank Indonesia is also using targeted measures to support the rupiah amid market volatility.
This story does not have two clearly opposing sides.
Bank Indonesia announced that it would keep its benchmark interest rate unchanged and reduce banks’ reserve requirements.
The first stage of the reserve cuts is due to take effect for conventional and Islamic banks.
The second stage is due to bring the reserve requirements to 7% for conventional banks and 5.5% for Islamic banks.
- Benchmark rate
- Unchanged
- Conventional-bank reserve requirement
- 9% to 7%
- Islamic-bank reserve requirement
- 7.5% to 5.5%
- First implementation date
- November 1, 2026
- Second implementation date
- December 1, 2026
- Estimated additional liquidity
- Rp190 trillion
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What people are saying
For conventional banks, the GWM is lowered from nine percent to seven percent,
If performance in these sectors improves, we will identify other sectors requiring greater support, especially since the GWM reserve cuts will help compensate,