Saturday , July 24 2021

The age of high interest rates, what is the ideal part of bank non-interest income?



JAKARTA, KOMPAS.com – Bank of Indonesia's monetary policy shrinks, with interest rising 175 bps from the beginning of the year to 5.75% and is expected to continue until 2019.

This will certainly reduce interest revenue, which is one of the sources of bank income. Chief Economist and Corporate Secretary of PT Bank Negara Indonesia (Persero) Tbk Kiryanto explained that in order to offset the pressure on net interest income banks should look for other income differences through non-interest income or revenue based on fees.

"Ideally, this is part of or charge (income) of the bank's total income is between 30% and 50% for the size of developing economies, including Indonesia, "Kiriyanta said when meeting the media at a discussion in Jakarta on Wednesday (November 11, 2018).

Also read: depressed net interest margin, target non-interest revenue banks

Unfortunately, so far the total income of the bank through a new income based on fees is 20% to 25% of the total income of the bank. Since sources of business financing are still based on bank credit.

Even though, the business world can get other sources of funding from the capital market or other non-banking financial industries.

"Based on BI data, 81% of banks' resources are available for business financing, with capital markets, insurance, financial corporations, or ICNBs," Kirianto said.

However, along with the progress of the Indonesian capital market, Kiryanto is optimistic that the business world will increasingly seek capital from the capital market by selling shares or conducting an initial public offering (initial public offering/ IPO).

This is due to the high interest in bank loans. That is what will become a gap for banks to be able to increase the portion of the fees-based contributions on their revenues.


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