Central bank (Bank Indonesia/BI) has issued a new regulation on reserve requirements, which aim to stimulate lenders to pump liquidity into the market and disburse more loans. BI governor Perry Warjiyo said commercial lenders having excess liquidity will get zero interest rate when they put the money on the central bank. Banks now get 2.5% interest for the funds they park at BI that is above the required level.

The new rule is expected to encourage banks to put excess liquidity into tge financial markets. This is also hoped to reducing the volatility in the overnight money market. BI will also introduce a “macroprudential liquidity buffer” that will replace rules on secondary reserve requirements. The bank will still have to put 4% of its total savings into central bank debt papers or government bonds. But the new regulation will allow the bank to repurchase 2% of those debt papers to the central bank in the case of tight liquidity.