Flash Focus: Indonesia Banks - Expanded KLM to Ease Liquidity Pressure

Bank Indonesia will raise the maximum Macroprudential Liquidity Incentive Policy (KLM) allocation to 6.0% of third-party funds from 5.5%, effective September 1, 2026. The incentive is implemented through a reduction in banks’ average reserve balances at BI, releasing additional liquidity to support priority-sector lending, reduce liquidity segmentation, and deepen the domestic money market.

Under the revised framework, the financing-channel ceiling will be lowered to 4.0% of deposits from 4.5%, while the interest-rate and financing-to-funding channels will be replaced by a Money-Market Deepening KLM (KLM PPU) of up to 2.0%. Banks with eligible government and BI securities—including rupiah-denominated non-repo SRBI—below 19% of total funding may receive an incentive of up to 200bps, while those at or above the threshold will receive none.

Using IDR deposits as a conservative proxy for total funding, we estimate SSB-to-deposit ratios of 15.7% for BBNI and 17.4% for BMRI, suggesting that both are likely to qualify for an incentive of up to 200bps. Their respective SSB proxies stand at IDR139.7tr and IDR238.0tr against deposits of IDR890.2tr and IDR1,364.1tr. In contrast, BBCA’s ratio reaches 27.9%, based on SSB of IDR321.6tr against deposits of IDR1,151.8tr, making it less likely to qualify under our preliminary screening.

We view the revised KLM positively for banking-system liquidity, particularly for BBNI and BMRI, which have experienced rapid loan growth and declining liquidity buffers. A potential 200bps reduction in effective reserve requirements could release around IDR17.8tr for BBNI and IDR27.3tr for BMRI, supporting LCR and reducing reliance on expensive or short-term funding. NSFR may also improve if the liquidity is retained in stable liquid assets or used to replace less-stable funding. While not direct capital relief, the policy provides greater balance-sheet flexibility and may reduce the need to accelerate loan and RWA growth.