BI cuts further the benchmark rate

Central Bank has cut further its benchmark BI Rate by 25 basis point to 6.75% on lower inflation rate and relatively stable macro economy and banking indicators.

This is the eighth rate cut since December 2008. Bank Indonesia expects banks would follow suit with lower lending rates. The average CAR of the banking system is 17%, while non-performing loans stay below 5%. BI predicts the economy will grow between 3.5% to 4% this year while inflation could go below 5%. The 6.75% BI rate is the lowest in years.

The question, when banks will follow suit? Or will they? Well, for sure, banks will start to cut interest rates for depositors, especially the lower-income group. Big depositors will be followed. And then, may be they will cut lending rates. 

How about motorcycle financing? Well, most multi finance charged over 30% per annum interest rate to motorcyclists simply because these guys never really care about how much the factual interest rate charged. They care more on how much their monthly payment. As long as it's within their range, they would just signing up motorcycle loans of above 40% in some companies.

Adira charged 30%-37.6% for motorcycle loan last year, while WOM Finance between 30% and 34%. Is it fair to take benefit out of people's lack of mathematical calculation on interest rate?

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