The Indonesian central bank, Bank Indonesia (BI), is considering a reduction in the secondary reserve requirement for banks from 5% to 4%, effective from June.  

This policy adjustment is set to free up Rp78.45tn ($4.84bn) in additional liquidity for the banking sector, reported Reuters.  

The statement was made by Solikin M. Juhro, BI’s head of macroprudential policy, during a press conference. 

The decision to cut the reserve requirement comes after the central bank’s third-interest rate reduction since September.  

BI is also raising the limit on foreign funding for local banks to 35% of their capital, up from 30% to enhance liquidity and loan growth. 

This move was confirmed by BI last week and that it would adjust the sharia Profit and Loss Sharing (PLM) by 100 basis points from 3.5% to 2.5% for sharia commercial banks, with repo flexibility of 2.5%, to be implemented from 1st June 2025. 

The central bank has also reiterated its strategy to stabilising the rupiah through interventions in both offshore and domestic foreign exchange markets, and by purchasing government securities in the secondary market.  

Furthermore, the bank also emphasised its strategies for term-repo and forex swap transactions to secure liquidity in the money market and banking industry. 

It was confirmed to reduce the BI-Rate to 5.50% and deposit facility (DF) rate to 4.75% and the lending facility (LF) rate to 6.25%, all by 25bps.