JAKARTA—Indonesia is reviewing a planned capital injection into major state-owned banks as the government seeks to strengthen lending capacity and support economic growth, officials said, while emphasizing that the measure is aimed at easing liquidity constraints rather than rescuing the banking sector.
Finance Minister Purbaya Yudhi Sadewa has proposed injecting up to 400 trillion rupiah ($22 billion) into members of the state-owned banking association, known as Himbara, using funds from the government's excess budget balance held at Bank Indonesia. He said the proposal followed reports from state lenders of tightening liquidity conditions that could constrain credit growth.
The government said the proposal remains under review and that details, including the timing, allocation and final amount of any capital support, will be determined through the appropriate fiscal and regulatory processes. Officials have not announced a final decision.
Bank Indonesia has separately said it is maintaining adequate banking liquidity through monetary and macroprudential measures while continuing to monitor conditions across the financial system. The central bank has also highlighted that Indonesia's banking sector remains well capitalized, with low levels of non-performing loans and sufficient capacity to support lending.
The proposed support comes as President Prabowo Subianto's administration pursues policies intended to accelerate economic growth while seeking to maintain investor confidence following concerns over fiscal policy and market stability. Credit rating agency S&P Global Ratings this month reaffirmed Indonesia's sovereign rating with a stable outlook, while noting that fiscal pressures appear manageable.
The review of the proposed bank capital injection remains ongoing, and the government has not provided a timetable for a final decision.
