BI ADVISED TO PERSUADE BANKS TO LOWER LENDING RATES

I ADVISED TO PERSUADE BANKS TO LOWER LENDING RATES

Jakarta, April 16 (ANTARA) - Coordinating Minister for Economic Affairs Hatta Radjasa said Bank Indonesia (BI) needs to treat commercial banks in "certain ways" to persuade them to lower their lending rates.

"In what certain ways, we will leave it to BI itself. I have talked with BI officials several times and we agreed that lending rates can be lowered but I will not intervene," Hatta said at his office here on Friday.

He said high interest rates in themselves carry certain disincentives, namely extremely high cost which eventually causes inefficiency.

"If interest rates are too high, the banks' lending-to-deposit ratio will be low, and the cost will be high and therefore keeping lending rates high is not efficient," he said.

Hatta noted that present lending rates were still high despite the fact that the central bank's benchmark rate had dropped to 6.5 percent since 2009.

"We indeed wish and hope for the lowering of banks' lending rates to encourage the real sector," he said.

He said the government had indeed cut the interest on credits for specific sectors such as micro and small businesses. "We have already reduced the interest on credits for smallholders (KUR) from 15 percent to 12 percent," he said.

Regarding the recent clashes in the Tanjung Priok port area, Hatta said a solution had to be found that respects both the cultural site and the International Port Security Standard (ISPS Code).

"We must adhere the ISPS Code with regard to security but on the other hand we must also respect the cultural site," he said.

He said there had been talks between port company Pelindo II and the heirs of the site and the Jakarta city administration would safeguard them.

"The President has already spoken against all forms of violence that claim lives," he said.