JAKARTA - Indonesian banks are making too much money, spurring calls from President Joko Widodo and the monetary authority to rein in their margins.

Bank Indonesia put out its latest rate transparency report last week, showing banks offering loan rates that are 4.75 percentage points more than the policy rate of 5.75 per cent, while one lender has a spread of as much as 11.99 per cent.

The report is meant to encourage banks to offer more competitive and efficient rates to speed up economic growth.

The biggest banks are not exempt. They are ranked high on a global list of major lenders with the widest net interest margins, according to data compiled by Bloomberg.

State-owned Bank Rakyat Indonesia’s net interest margin (NIM) – the gap between how much it earned in interest on loans compared with the amount it paid in interest on deposits – was 7.85 per cent at the end of 2022, up from 7.7 per cent in the previous year.

Bank Mandiri, also a state bank, had a margin of 5.47 per cent, compared with 5.09 per cent in 2021.

Mr Widodo, popularly known as Jokowi, raised concern over the high margin during a speech to financial regulators and company leaders in Jakarta last week, warning about the impact it might have on small borrowers. 

“Our banks’ NIM is so high, probably the highest in the world,” he said.

“I want the banks to give more support for the small business sector. They are our strength. Don’t forget them.” 

In response to Mr Widodo’s remarks, the Financial Services Authority plans an evaluation to find “an ideal level” for bank margins, said Mr Dian Ediana Rae, head of banking supervision at the agency also known as OJK.

BLOOMBERG