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Indonesia[IDR]

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Institutional setup of monetary policy decisions and operations

Policy decision body, size and composition Board of Governors, consists of Governors, Senior Deputy Governors and 4 to 7 Deputy Governors
Major mandates 1 Bank Indonesia is mandated with creating and maintaining rupiah stability. That mandate is explicitly stipulated in Act No. 23 of 1999 concerning Bank Indonesia, as amended by Act No. 3 of 2004 and Act No. 6 of 2009 in Article 7. Rupiah stability encompasses two dimensions. First, rupiah stability is the price stability of goods and services, as reflected by inflation. The second dimension relates to rupiah exchange rate stability against other currencies. Indonesia implements a free-floating exchange rate regime and exchange rate stability is necessary to achieve and maintain price and financial system stability.
Decision-making process As mandated in laws and regulations concerning Bank Indonesia, the Board of Governors Meeting (RDG) is the highest decision-making forum at Bank Indonesia. Through this forum, the Board of Governors determines and evaluates principal and strategic policies. If consensus cannot be reached, however, the Governor has the final decision. A Board of Governors meeting is only convened when quorum is reached, namely half of the members of the Board of Governors.
Frequency / length of meetings The Board of Governors holds weekly and monthly meetings. The monthly Board of Governors meeting is convened at least once per month and, since 2016, has been held over two consecutive days in order to improve decision-making quality.


On the first day of the monthly Board of Governors meeting, the results of economic assessments as well as the outlook for monetary policy, financial system stability, the payment system and rupiah currency management are presented, discussed and integrated with the various policy mix options. On the second day, the recommendations are discussed, while the monetary and macroprudential policies are determined along with payment system and rupiah currency management policies.


The weekly Board of Governors meeting is held at least once per week to evaluate monetary policy implementation, financial system stability developments, payment system and rupiah currency management developments as well as to determine other principal and strategic policies in relation to task implementation at Bank Indonesia.
Frequency of announcements The Board of Governors holds weekly and monthly meetings. The monthly Board of Governors meeting is convened at least once per month and, since 2016, has been held over two consecutive days in order to improve decision-making quality.


On the first day of the monthly Board of Governors meeting, the results of economic assessments as well as the outlook for monetary policy, financial system stability, the payment system and rupiah currency management are presented, discussed and integrated with the various policy mix options. On the second day, the recommendations are discussed, while the monetary and macroprudential policies are determined along with payment system and rupiah currency management policies, others policies including communication strategy.


The weekly Board of Governors meeting is held at least once per week to evaluate monetary policy implementation, financial system stability developments, payment system and rupiah currency management developments as well as to determine other principal and strategic policies in relation to task implementation at Bank Indonesia.
Main policy target BI 7-Day Reverse Repo Rate (BI7DRR)

Overview of key features

Key policy rate BI 7-Day Reverse Repo Rate
maturity (days) 7
Operating target Unsecured interbank market rate
maturity (days) 1
Standing facilities Lending, deposit
Corridor width (bp) 150
Reserve requirements Yes
maintenance period 2 weeks
Main operation 2 RRP
functions liquidity management
maturity (days) liquidity management
regular interval liquidity management
frequency liquidity management
Overall frequency Daily
Discretion left to operational desk maturity, amounts, and timing
Key policy signals via
announcement
keynote tender
standing facility
other

Monetary policy communication

Explicit use of forward guidance Y
Timing / media of policy announcement Yes. 14:00 pm on the day second day of board meeting via press conference and live streaming on central bank website via youtube, social media and press release
Policy announcement and documents Policy rate / BI-7DRR
Explaining policy decisions Detailed press release/media statement and Q&A
Dissemination of minutes (timing / media) No. However, BI publish:
1. Monthly Monetary Policy Review in Bahasa Indonesia: Monthly, 1 days after board meeting
2. Monthly Monetary Policy Review in English: Monthly, 3 days after board meeting
3. Monetary Policy Report in Bahasa Indonesia: Quarterly, 1 days after board meeting
4. Monetary Policy Report in English: Quarterly, 3 days after board meeting
Content of minutes N
Publication of forecasts 3 Yes, quarterly basis on Monetary Policy Report
Publication of projected path of policy rate 4 N

Reserve requirements: ratios and size

Main functions served Liquidity management
Domestic currency 3.5% (conventional) 3.5% (sharia) 5
Foreign currency 4% (conventional) 1% (sharia)
Average -
Required reserves IDR215.57trn 6
Required reserve as % of GDP 1.40% 7
Actual reserves IDR256.84trn 8
Actual reserve as % of GDP 1.66% 9

Main features of reserve requirements

Averaging Y 10
Carry-over N
Type Lagged
Maintenance period 2 weeks
end (day) 15th and end of month
Calculation period 2 weeks
end (day) 15th and end of month
Lag before maintenance 2 weeks
Vault cash N
restrictions
Remuneration Y 11
average rate
marginal rate
Framework last changed 08/20

Liquidity position and forecasting

Structural Position Surplus
Most volatile factor(s) Government sector flows
Most unpredictable factor(s) Government sector flows
Forecast horizon(s) 1 year
Frequency Daily
Frequency of revision Daily (3x)
Forecast published? Yes, daily

Standing facilities: lending / market ceiling

Name (i) Lending Facility
(ii) Financing Facility (Sharia)
Form (i) Repo
(ii) Other contract in sharia principle
Pricing method Policy Rate + 75bps
Maturity O/N
Access limited by/to Collateral; banks registered as participants in monetary operations
Function(s) Establish ceiling of O/N rate corridor

Standing facilities: deposit / market floor

Name Deposit Facility 12
Form Deposit
Pricing method Policy Rate - 75bps
Maturity O/N
Access limited by/to Banks registered as participants in monetary operations
Function(s) Establish floor of O/N rate corridor

Open market operations: repo or reverse repo

Name/Type 13 (i) RRP
(ii) RP 14
Maturity (i) 1 week to 12 months
(ii) 1 week to 12 months
Frequency (i) RRP: daily (1 week)
(ii) RP: daily 15
Pricing method Auction
Access limited by/to Banks registered as participants in monetary operations
Function(s) (i) RRP: Liquidity absorption
(ii) RP: Liquidity injection

Open market operations: central bank bills

Name (i) SBI (BI Certificate)
(ii) SDBI (BI Certificate of Deposit)
(iii) SBIS (Sharia BI Certificate)
(iv) SukBI (BI Sukuk)
Total issuance (i & ii) Not currently being issued
(iii) Rp12.9 trillion
(iv) Rp42.6 trillion 16
Maturity (i & ii) -
(iii) 6 months - 12 months
(iv) 1 week - 3 months
Restrictions on possible maturities (i, ii, iii, iv) Up to 12 months
Pricing method Auction
Access limited by/to Banks registered as participants in monetary operations
Discretion left to operational desk Maturity, amounts, timing

Open market operations: FX swaps

Maturity 1, 3, 6, 12 months
Frequency Every Business Day
Pricing method Auction
Access limited by/to Banks registered as participants in monetary operations
Function(s) Liquidity management

Other significant liquidity management means

Name/Type 17 (i) Term Deposit
(ii) OT (purchase and sales)
Form (i) Term Deposit
(ii) OT (purchase and sales)
Frequency (i & ii) As needed
Maturity (i) 2 - 6 days
(ii) - 18
Pricing Method (i) Auction
(ii) Auction/Bilateral
Access limited by/to (i & ii) Banks registered as participants in monetary operations
Function(s) (i & ii) Liquidity management

Settlement systems and intra-day liquidity facilities

Settlement system RTGS, since 2000
Intra-day liquidity facility Intra-day repo
Charge No charge 19
Foreign currency settlement system Link to Hong Kong’s USD CHATS system
CLS participation by banks No
Other settlement system(s) Yes 20

Collateral

Standing facilities: List of eligible collateral Domestic currency denominated securities:
1. Securities issued by BI (SDBI, SBI, SBIS, SukBI)
2. Securities issued by Government of Indonesia
Standing facilities: Discretion of central bank on collateral 21 Yes
Open market operations: List of eligible collateral Domestic currency denominated securities:
1. Securities issued by BI (SDBI, SBI, SBIS, SukBI)
2. Securities issued by Government of Indonesia

Foreign currency denominated securities:
1. Securities issued by other countries (sovereign) which the central bank has agreement with BI
Open market operations: Discretion of central bank on collateral 22 Yes

Dissemination of operational information: liquidity forecast

Forecast published? Yes
Channel(s) (i) BI website
(ii) LHBU
(iii) Bloomberg 23
Timing (i & ii) 08:30 & 14:00
(iii) 08:30
Remarks Forecast for current day only

Dissemination of operational information: open market operations

Volume and price published? Yes
Channel(s) BI website, LHBU, BI-ETP, Bloomberg, Reuters 24
Timing Daily

Dissemination of operational information: standing facilities

Lending facility usage: Channel(s) BI Website
Lending facility usage: Timing Daily
Deposit facility usage: Channel(s) BI Website
Deposit facility usage: Timing Daily

Other information dissemination

Type A. Policy or Instituitonal Reports:
- Indonesia Economic Report
- Monetary Policy Report
- Monetary Policy Review
- Nusantara Report
- Quarterly Report to Parliament
- Bank Indoneia Annual Report

B Thematic Publication:
- Press Release
- BoG Statement
- Survey & Statistics
- Speech
- Researh Dissemination
- Advertorial
Channel(s) A. Conventional:
- Mass media
-Formal & informal meeting
-BI – CSR & Internal Publication
B. Digital
- Social Media
- BI Website
- Online Media
C. Others
-Key Opinion Leader
- Opinion Maker & Edoser
Timing Monthly, Quarterly, BIAnnual, Annualy, as needed

1 Describe as well the legal status of the mandate and involvement of government

2 RP = reversed purchase (repo, inject liquidity), RS=RRP=reversed sale (reverse repo, absorb liquidity), RT=reversed transaction (repo or reverse repo).

3 For instance, economic and inflation forecasts related to policy decision.

4 If applicable, describe the publication of any fan-charts or uncertainty bands around the forecasts/projections.

5 With an incentive of a 50 bps daily reserve requirement reduction for banks enganged in the export-import, MSMEs, and other priority sectors financing

6 With reserves in domestic currency as of 30 July 2021 and 2020 GDP.

7 With reserves in domestic currency as of 30 July 2021 and 2020 GDP.

8 With reserves in domestic currency as of 30 July 2021 and 2020 GDP.

9 With reserves in domestic currency as of 30 July 2021 and 2020 GDP.

10 The fulfilment of required reserves is in daily and average forms.

11 Effective on 1st August 2020 for banks which are meeting the daily and average rupiah reserve requirements. Remunerations are given on 3% of third-party fund.

12 including other contract in sharia principle

13 RP=Reversed purchase (“repo”), RS=RRP=Reversed Sales (“reverse repo”), RT=Reversed transaction (RP or RRP).

14 (ii) including other contract in sharia principle

15 (i) current: 2 week - 1 month: 3x/week; 3 month: 1x/week; 6-12 month: 1x/month

16 (i) SBI last auctioned on Sep 13th, 2019
(ii) SDBI last auctioned on July 2nd, 2018
(iii & iv) outstanding as of end Dec 2020

17 OT = Outright Transaction, DB = Direct Borrowing, DL = Direct Lending.

18 (i) possible maturity up to 12 months

19 Effective since 1 November 2018.

20 BI-SSSS is a transaction facilities with BI including its administration and electronic securities administration; SKN is an interbank clearing system for cheque payment, other debit notes and interbank credit transfer; C-BEST is settlement system for stocks, corporate bonds, etc. (others than government and central bank securities).

21 Discretion of the central bank to expand collateral types, and list of additional collateral types that the central bank can take on a discretionary basis. Also, additional information such as delays required if discretionary collateral changes.

22 Discretion of the central bank to expand collateral types, and list of additional collateral types that the central bank can take on a discretionary basis. Also, additional information such as delays required if discretionary collateral changes.

23 LHBU: Commercial Bank Daily Reporting system

24 LHBU: Commercial Bank Daily Report system
BI-ETP: Bank Indonesia Electronic Trading Platform