Home Blog The Mechanism of Benchmark Interest Rate in Indonesia Accounting | Business Setup | Company Registration | Finance | Indonesia The Mechanism of Benchmark Interest Rate in Indonesia InCorp Editorial Team 25 June 2025 5 minutes reading time Table of Contents The Benchmark Interest Rate in Indonesia The Mechanism for Setting the Benchmark Interest Rate A benchmark interest rate, also known as the base interest rate, is the minimum interest rate that investors will demand. A third party determines this rate and typically reflects the cost of borrowing money in various markets. They play a crucial role in the banking and financial system and also the economy as a whole. The benchmark interest rate is often updated and serves as a practical foundation for financial agreements, including mortgages, bank overdrafts, and other more intricate financial transactions. The Benchmark Interest Rate in Indonesia The national central bank, Bank Indonesia, sets the benchmark interest rate in Indonesia. They are responsible for maintaining the economic and financial climate within the country. As the central bank, BI periodically updates the interest rate (known as the BI Rate) with the Board of Governors (Dewan Gubernur) by gauging the local and global economy. After being made public, the value of the BI Rate will be used as a benchmark for interest rates on loans or credit and hence has a significant impact on interest rates for banks and leasing or financing firms. Additionally, the BI Rate also captures the stance of Bank Indonesia regarding monetary policy. This necessitates rigorous computation of the value, considering various influencing elements like inflation, future monetary policy, macroeconomics, and other economic issues. The Mechanism for Setting the Benchmark Interest Rate The quantity of demand for goods, the state of the economy, and many other factors are examples of metrics that are considered and impact the BI Rate. The inflation rate affects the determination of the BI Rate in addition to considering both domestic and international economic factors. As a result, the BI Rate will rise with rising inflation rates and decrease when inflation is reduced. Continuous price hikes will often result in less consumer demand and reduced spending. Debt consumers will be required to pay lenders more interest when interest rates rise. The more money they have to pay to keep their ongoing debts, the less money they will have available to spend on goods and services, which generally harms their spending patterns. Since consumers typically cut back on luxury purchases when they have less disposable income, businesses that deal in luxury goods or services may be more negatively impacted by an increase in loan rates than those that sell necessities. To manage the inflation rate, the BI Rate must be scaled back. Another instance that requires an adjustment of the benchmark interest rate is when the public’s interest in banking services declines. This will, in turn, lead to bank loan rates to follow suit and generate interest from the general people to use financial services and apply for loans. You should be aware, nevertheless, that despite the decrease in BI Rate, banks are still unable to withdraw funds from Bank Indonesia for use in general circulation. All financial institutions are required to wait at least a year before they can withdraw their deposit. This is to anticipate sudden increases, often over a few days or weeks, in the amount of money moving around the market. The same is true for inflation. A decline cannot directly match the reduction in the BI Rate in the inflation rate. Some banks still prefer to hold their money at Bank Indonesia. How the Benchmark Interest Rate Affects Businesses No matter the size or efficiency of a business, its ability to be solid and profitable depends on the state of the economy. Interest rates, for example, are an economic factor that can either advance or impede your business. Once you are aware of the environment in which your company operates, you can adapt to changes in interest rates to both mitigate their consequences and benefit from them. Banks raise the price of corporate loans when interest rates rise. This implies that you’ll have to set aside a significant portion of your income to cover loan interest, which lowers profitability. When financing rates are high, you can decide against starting new initiatives or expanding your business, which would hinder its development. It is much more advantageous for you to take out new loans to invest in the growth of your business because of low-interest rates. Your loan will cost you less in the long term if you lock in a lower interest rate. When interest rates are low, you can invest the available cash your company earns in high-yield accounts. During an extended time of low-interest rates, you could also be able to refinance some of your outstanding loans, which would help to stabilize your overall debt. Regarding this, InCorp Indonesia provides accounting services that would help extend further details to help your business gain greater profits. Both domestic and foreign enterprises are impacted by the revision of the benchmark interest rate that BI issues. The cost of financing for export and import businesses will likewise go down when the benchmark interest rate declines. Additionally, it is anticipated that a reduction in interest rates will channel foreign investments into the country. Aside from accounting services, InCorp Indonesia (an Ascentium Company) also assists with company registration for domestic and foreign enterprises. Read Full Bio Verified by Daris Salam COO Indonesia at InCorp Indonesia With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships. Frequently Asked Questions What responsibilities does a PMA company have in terms of non-tax compliance? In Indonesia, a PMA company is typically required to submit various reports to relevant authorities, such as: Annual financial report Investment realisation report Manpower and employee welfare report Expatriate utilisation report Company loan repot Foreign exchange and prudential principles report However, depending on the business activities and classification relevant authority may require additional reports from a PMA company. How is the process of liquidating a PMA company in Indonesia, and how long does it take? The procedures for (voluntarily) liquidation typically involve the following steps: Conduct a general shareholder meeting to approve the liquidation and the liquidator’s nomination Notify the Ministry of Law and Human Rights as well as the creditors of the liquidation and the distribution plan for the assets by newspaper notice All business licenses and tax numbers should be canceled or revoked; the tax office will conduct a tax audit to revoke the tax number Make sure creditors are paid and that any liquidation funds are distributed to shareholders (if any) Conduct a general meeting of shareholders to approve the liquidator’s discharge and acquittal Notify the Ministry of Law and Human Rights of the liquidation’s outcome. After receiving the notification, the Ministry of Law and Human Rights will deregister the company’s status as a legal entity and remove its name from the Company Registry Release the liquidation’s outcome in a newspaper Completing the liquidation process can take around two years. What is the difference between PT and CV? You can find the difference below: PT: limited liability company (shareholders are not legally liable for company liabilities) CV: a proprietary company where liability falls on the shareholders Is having audited accounts mandatory? Audited financial statements are required for: Entities gathering funds from the public (e.g., banks, insurance companies) Entities issuing debt instruments Publicly listed companies State-owned enterprises Companies with assets and/or turnover exceeding IDR 50 billion Entities mandated by legislation Get in touch with us. Lead Form Contact Full NameEmailPlease provide corporate email where possiblePhone NumberOffice SetupWhich city are you planning to expand into?JakartaSemarang/Central JavaBali/LombokBatam/SumateraSurabaya/East JavaOther ProvincesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Package (20% OFF)[SPECIAL PACKAGE] Product Registration + License Holder (20% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Service (20% OFF)[SPECIAL PACKAGE] Comprehensive Industrial Package (15% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Service (20% OFF)[SPECIAL PACKAGE] Comprehensive Industrial Package (15% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration (25% OFF) + Office Space (Private Office 30% OFF)[SPECIAL PACKAGE] Company Registration + Investor KITAS (25% OFF)[SPECIAL PACKAGE] Accounting + Tax Services+ Annual Fintax Report (20% OFF)[SPECIAL PACKAGE] Payroll Services for Executive Role (20% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration (20% OFF) + Office Service (25% OFF)[SPECIAL PACKAGE] Company Registration + Micro Finance Services (25% OFF)[SPECIAL PACKAGE] Property Assistance: Due Diligence + AJB Purchase/Lease Agreement (25% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesServices Company Registration Renting Virtual and Serviced Office Mergers and Acquisitions Business and Import Licenses Corporate Recovery and Insolvency Closing of Company (Dissolution) Land and Property Ownership Shelf Company Local NomineeServices Accounting and Tax Reporting Audit and Review Transfer Pricing Compliance Tax RefundHuman Resource Sub Services Payroll Outsourcing Employer of Record Recruitment and HR Establishment Employment ServiceServices Business Visa Work Permit and KITAS Dependent Visa (Spouse and Family) OtherBusiness Visa Subservices Business Visa Visit Visa Visa ExtensionServices Medical Device Beauty (Skincare and Cosmetic) Food and Beverage Health Supplement Household Product Halal Certification TrademarkServices Legal Consultation Legal Agreement Service Due Diligence and Background Check Company Documents RevisionBusiness Advisory Business Advisory Services ESG Reporting & Advisory Internal Audit Risk ManagementMore Services Market Research and Analysis Local Distributor and Partner Bank AccountMessageSubmit What you’ll get A prompt response to your inquiry Knowledge for doing business from local experts Ongoing support for your business Disclaimer The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind. We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website. More on Accounting How The New Investment List Liberated Media and Telecommunications Industry in Indonesia Read more Discover the Hidden Profits of Bali’s Exclusive Beach Clubs Read more Imported Household Product Registration in Indonesia Read more